Customer lifetime value calculator for retail

What a customer is worth over the relationship, not over one visit

Average basket

Visits per year

Length of the relationship (years)

Margin rate (%)

Target margin to acquisition ratio

Per year, per customer

€320.00

Lifetime revenue

€960.00

Lifetime margin

€336.00

Acquisition budget

€112.00

at a ratio of 3 to 1

One extra year of loyalty is worth €112.00 of margin per customer, without selling a single item more per visit.

The average hides a very uneven reality. Working out a value per segment leads to sounder decisions.

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A customer spending thirty pounds today is not worth thirty pounds. If they come back once a month for three years, they are worth over a thousand. That difference changes everything: it tells you how much you can reasonably spend to attract a new one, and why keeping an existing customer almost always costs less.

How to use it

How it works

Describe the typical behaviour

Average basket, number of visits per year and average length of the relationship in years.

Add your margin

The revenue generated is not profit. The margin rate turns gross value into real value.

Read the acquisition budget

The tool derives the maximum it stays rational to spend to win a customer, at the ratio you set.

Worth knowing

Four things to keep in mind

Reason in margin, not in revenue

A lifetime value of a thousand at fifteen per cent margin leaves only a hundred and fifty. Confusing the two leads to overspending on acquisition and noticing far too late.

Relationship length is the most sensitive factor

Going from two years of loyalty to three raises the value by fifty per cent, without selling a single item more per visit. That is where loyalty schemes act.

Three to one is a prudent benchmark

Spending one to earn three in expected margin leaves room for estimation error. Below two to one, acquisition gets fragile.

Segment before concluding

The average masks a very uneven reality: a minority of customers often carries half the revenue. Working out a value per segment leads to sounder decisions than a single average.

FAQ

Frequently asked questions

Average basket times annual visits, times the length of the relationship, times the margin rate. That is the simple version, and it is enough for a local business.

Full models do, to account for a pound in three years being worth less than today. Over horizons of two to five years, the effect stays modest next to the uncertainty in the other inputs.

A loyalty card or a customer file gives the date of the first and last visit. Without that data, a cautious estimate beats an invented figure.

Deciding on a goodwill gesture. Giving ten pounds to a customer worth three hundred is a different decision from the same amount given to a passer-by.

View all questions

Also