LTV Calculator: Customer Lifetime Value Formula for E-commerce & SaaS

• LTV (Customer Lifetime Value) = Average Order Value × Purchase Frequency × Gross Margin × Customer Lifespan. It predicts total profit from one customer over their entire relationship with you.
• For SaaS: LTV = ARPU × Gross Margin ÷ Churn Rate. A 2% monthly churn = 12-month average customer lifespan; 0.5% monthly churn = 4-year lifespan. Churn is the biggest LTV lever in SaaS.
• LTV is why Amazon can spend $200 to acquire a Prime member who pays $139/year — the 7+ year retention makes the math work. Without LTV, acquisition decisions are made blindly.
• Increasing LTV by 25% through retention and upsell is almost always cheaper than acquiring 25% more customers.

Use our free LTV Calculator to compute customer lifetime value for e-commerce, SaaS, and subscription businesses — and find what happens when you change any one variable.

LTV Formulas by Business Model

E-Commerce / Retail LTV

LTV = AOV × Purchase Frequency per Year × Gross Margin % × Customer Lifespan (years)

Where:

• AOV = Average Order Value
• Purchase Frequency = Average purchases per year
• Gross Margin = (Revenue − COGS) ÷ Revenue
• Customer Lifespan = Average years before a customer stops buying

Example — Fashion D2C brand:

• AOV: ₹1,800
• Purchase frequency: 3.5×/year
• Gross margin: 45%
• Average lifespan: 2.5 years

LTV = ₹1,800 × 3.5 × 0.45 × 2.5 = ₹7,087.50

SaaS / Subscription LTV

LTV = ARPU × Gross Margin ÷ Monthly Churn Rate

Where:

• ARPU = Average Revenue Per User (monthly)
• Gross Margin = typically 60–85% for SaaS
• Monthly Churn Rate = % of customers who cancel per month

Example — SaaS tool at ₹2,500/month:

• ARPU: ₹2,500
• Gross margin: 72%
• Monthly churn: 2%

LTV = ₹2,500 × 0.72 ÷ 0.02 = ₹90,000

Average customer lifespan = 1 ÷ 2% monthly churn = 50 months (4.2 years)

LTV Sensitivity: Which Variable Matters Most

SaaS LTV — ₹2,500 ARPU, 72% margin, 2% monthly churn → LTV ₹90,000

Change	New LTV	% Change
Reduce churn 2% → 1.5%	₹1,20,000	+33%
Increase ARPU ₹2,500 → ₹3,000	₹1,08,000	+20%
Improve margin 72% → 80%	₹1,00,000	+11%
Reduce churn 2% → 1%	₹1,80,000	+100%

The lesson: For SaaS, reducing churn is the highest-leverage LTV improvement — far more impactful than raising prices or cutting costs. A 1% churn improvement doubles LTV.

E-Commerce LTV — ₹1,800 AOV, 3.5× freq, 45% margin, 2.5 yrs → LTV ₹7,088

Change	New LTV	% Change
Increase lifespan 2.5 → 3 years	₹8,505	+20%
Increase frequency 3.5 → 4×	₹8,100	+14%
Increase AOV ₹1,800 → ₹2,200	₹8,663	+22%
Improve margin 45% → 50%	₹7,875	+11%
All combined	₹13,200	+86%

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LTV:CAC Table: At What CAC Does Your LTV Make Sense?

LTV	CAC for 3:1 ratio	CAC for 5:1 ratio	CAC for 2:1 ratio
₹3,000	₹1,000	₹600	₹1,500
₹7,500	₹2,500	₹1,500	₹3,750
₹15,000	₹5,000	₹3,000	₹7,500
₹50,000	₹16,667	₹10,000	₹25,000
₹1,00,000	₹33,333	₹20,000	₹50,000

Use this table to instantly know the maximum defensible CAC for your LTV.

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Predicted LTV (pLTV): The Machine Learning Approach

Traditional LTV uses averages. Predicted LTV uses early behaviour to forecast individual customer value.

Signals that predict high LTV customers:

• Customers who purchase within 7 days of signup (vs. 30+ days)
• Customers who use 3+ product features in week 1 (SaaS)
• Customers acquired via referral (vs. paid ads)
• Customers who make a second purchase within 30 days (e-commerce)
• Higher first-order AOV customers

Practical application: If a customer cohort acquired via referral has 2× higher LTV than paid acquisition — double down on referral programs even at slightly higher upfront cost.

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How to Increase LTV

For E-commerce: 1. Increase purchase frequency: Post-purchase email sequences, loyalty programs, subscription options 2. Increase AOV: Upsells, cross-sells, bundles, free shipping thresholds 3. Extend lifespan: Win-back campaigns for churning customers, exclusive member benefits 4. Improve retention: Product quality, packaging, customer service

For SaaS: 1. Reduce churn: Onboarding improvements, proactive customer success, usage alerts before cancellation 2. Upsell to higher tiers: Feature-based plan expansion, usage-based pricing 3. Expand accounts: Seat expansion, department-level adoption 4. Annual plans: Convert monthly to annual (immediately 12× the committed revenue)

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FAQ

What is a good LTV for an e-commerce brand in India?

LTV:CAC ratio of 3:1 is the benchmark regardless of absolute LTV. However, absolute LTV of ₹5,000–₹8,000 for a mid-range D2C brand with ₹1,500–₹2,000 AOV is typical. High-repeat categories (supplements, personal care, pet food) see ₹15,000+ LTV.

How do I calculate customer lifespan if I'm a new business?

For new businesses: use industry benchmarks or set a conservative assumption (e.g., 2 years for e-commerce). Track cohort retention monthly — after 6 months of data, you can model churn rate and derive expected lifespan. Don't use LTV in fundraising without disclosing the assumption basis.

What is the difference between LTV and CLV?

They are the same metric — CLV (Customer Lifetime Value) and LTV (Lifetime Value) are used interchangeably. Some companies add the "C" to emphasise it's customer-focused; some use "CLTV." The formula and meaning are identical.

Can LTV be higher than total revenue per customer?

No — LTV is calculated on gross margin (profit), not revenue. LTV should always be below total revenue generated by the customer (by gross margin %). If your LTV calculation exceeds total customer revenue, you've made an error in the formula.