Customer lifetime value (LTV) answers one of the most important questions in marketing:
How much is a customer actually worth?
Not just on their first purchase — but over the full relationship.
LTV connects revenue, margin, purchase frequency, and retention into a single number you can use to set CAC limits, estimate payback, and decide where to scale.
The AMA Lifetime Value (LTV) Calculator turns those inputs into a working model. You can estimate LTV using either a simple average lifetime or a cohort-based retention curve, then compare that value to what it costs to acquire that customer (CAC) to see whether your acquisition strategy is economically sustainable.
Because small changes in retention often move LTV far more than small changes in margin or discount rate.
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Why Use the AMA Lifetime Value (LTV) Calculator
- Make CAC decisions with profit, not revenue
It calculates Contribution LTV using Gross Margin (%), which is closer to real unit economics. - Choose the right retention approach
Use Simple when you only have an average lifetime. Use Cohort when you have retention by period. - Get a clear payback period
Payback is calculated as CAC ÷ contribution per period, so you can sanity-check growth efficiency. - Pressure-test assumptions fast
Swap retention curves, frequency, and margin to see how sensitive LTV:CAC is.
How To Use the Toolkit
- Set Retention Unit (Months or Weeks).
- Enter CAC ($).
- Enter Average Order Value (AOV) ($).
- Enter Orders per Month/Week.
- Enter Gross Margin (%).
- In Simple, enter Average Customer Lifetime (months/weeks).
- In Cohort, paste Cohort Retention by Month/Week (%) as comma or line-separated values (starting with 100).
- Read the LTV vs CAC panel for LTV:CAC, Payback, and LTV (Revenue) vs LTV (Contribution).
AMA Lifetime Value (LTV) Calculator Features & Capabilities
| Feature | Description |
|---|---|
| Simple | Uses Average Customer Lifetime (months/weeks) as expected active periods. |
| Cohort | Estimates expected active periods by summing the retention curve. |
| Retention Unit | Switches inputs/outputs between Months and Weeks. |
| CAC ($) | Acquisition cost per new customer. |
| Average Order Value (AOV) ($) | Typical revenue per order. |
| Orders Per Month/Week | Purchase frequency per period. |
| Gross Margin (%) | Used for Contribution LTV and payback. |
| LTV:CAC | Ratio based on contribution (falls back to revenue if needed). |
| Payback (months/weeks) | CAC ÷ contribution per period. |
| LTV (Revenue) | (AOV × frequency) × expected active periods. |
| LTV (Contribution) | LTV (Revenue) × gross margin. |
Common Challenges Solved by This Toolkit
| Challenge | Toolkit Solution |
|---|---|
| “Our LTV is just revenue.” | Separates LTV (Revenue) from LTV (Contribution) using Gross Margin (%). |
| “We don’t know the true lifetime yet.” | Cohort mode works with early retention curves instead of guessing a lifetime. |
| “CAC feels high but we can’t prove it.” | Shows LTV:CAC and a concrete Payback period. |
| “Teams argue about assumptions.” | Makes AOV, frequency, margin, and retention explicit inputs you can change and compare. |
Tip
If you’re unsure about retention, start with Simple, then switch to Cohort with a conservative curve to see how quickly LTV:CAC can tighten.