How to Calculate Customer Lifetime Value (CLV) for B2C Brands (2025)

To calculate Customer Lifetime Value (CLV) in a B2C business, you need to work out the total revenue a customer generates over their relationship with your brand. The basic formula involves multiplying average purchase value, purchase frequency, and customer lifespan. For a more accurate profit-based calculation, you can also subtract acquisition and retention costs.

For example, an online fashion retailer might calculate CLV as: ($50 average order) × (4 purchases per year) × (5 years) = $1,000 CLV

This means that, on average, each customer is worth $1,000 in total revenue over their relationship with the business.

Basic CLV Formula: CLV = Average Order Value × Purchase Frequency × Customer Lifespan

Advanced CLV Formula (Including Costs): CLV = (Average Order Value × Purchase Frequency × Customer Lifespan) - (Customer Acquisition Cost + Retention Cost)

For example, if a meal subscription service has:

• $40 per order
• Customers order twice a month
• They stay subscribed for 2 years
• Acquisition cost is $80
• Then, CLV = ($40 × 2 × 24) - $80 = $1,840

Yes and no. In many cases, CLV (Customer Lifetime Value) and LTV (Lifetime Value) are used interchangeably. CLV is typically customer-specific, measuring the total revenue an individual customer will generate.

LTV is often used as an aggregate metric, and represents the average lifetime value across all customers. For B2C brands, CLV helps with segmentation, while LTV helps with business-wide financial planning.

Let’s take a coffee shop loyalty program as an example:

• A customer buys coffee 3 times per week
• Their average order value is $5
• They remain loyal for 3 years
• CLV = $5 × (3 × 52 weeks) × 3 years = $2,340

This means that each loyal coffee shop customer contributes around $2,340 in revenue.

By knowing CLV, the coffee shop can in theory start to provide incentives for a coffee & biscuit bundle that adds $1 to each order to potentially increase CLV to $2,808.

The 80/20 rule (Pareto Principle) states that 80% of a business’s revenue comes from 20% of its customers. For B2C brands, this means that a small percentage of loyal customers can drive the majority of sales when good retention and loyalty strategies are in play. Example:

For an online skincare store, 20% of customers might:

• Purchase higher-end products
• Buy multiple times per year
• Subscribe to a monthly beauty box

In this case, the store can maximize customer retention rate, loyalty programs, and upsells to increase CLV by focusing on this top 20%.

Similarly, by applying the 80:20 rule to your customer insights, you may find that there are certain types of customers or products that lead to higher CLV over time. For example, eyeliner as a first conversion may show a causality with higher CLV than lipgloss.

A good CLV depends on the industry, product type, and average customer lifespan, but must also take account of variables and outliers that can skew your results.

General CLV benchmarks for B2C industries:

• E-commerce: $300 - $2,000+
• Subscription services: 5× Monthly Subscription Fee
• Retail (brick-and-mortar): $500 - $5,000
• Luxury brands: $5,000 - $50,000+

A healthy CLV-to-CAC ratio is typically 3:1, meaning a customer should generate 3× the revenue of their acquisition cost. 

And when thinking about potential outliers or variables that can skew results, it is often a good idea to add variables such as age, location or seasonality. For example, a 90-year-old making a first purchase may not have the same CLV potential as a millennial customer!

Yes! CLV is a critical KPI for B2C brands because it helps measure the success of customer retention strategies & loyalty tactics, marketing efficiency (How much should you spend on ads?), and business profitability (and many others!). 

CLV is a long-term growth indicator and should be tracked alongside churn rate, average transaction value, and customer acquisition cost (CAC).

Yes AND no, but it depends on the level of detail. For small businesses, a simple CLV formula using historical data is easy to apply. For large e-commerce or subscription brands, advanced analytics and predictive modeling improve accuracy.

CLV should be utilised carefully though, because if it is being used to underpin strategic decisions then the wrong calculations have the potential to wreck your business as much as it may transform the business positively. 

Yes, CLV can be negative if a customer costs more to acquire and retain than they generate in revenue. Reasons why CLV can be negative in B2C brands:

• High customer acquisition cost (CAC): Spending too much on ads
• Low repeat purchases: Customers buy once and never return
• High churn rate: Subscription cancellations within the first few months
• Excessive discounting: Cutting profit margins too low

For example, if a food delivery service spends $50 to acquire a customer, but they only make one $20 order, the CLV is negative (-$30).

To fix a negative CLV, brands need to lower customer acquisition costs (CAC) through better targeting, increase repeat purchases with loyalty incentives and improve retention through better customer experience optimization. 

Adding the estimated customer lifespan into the CLV calculation is therefore essential for understanding true CLV rather than focussing on the first conversion only, which some businesses calculate by mistake.

Segmenting your customer database allows for more precise strategies. Consider segmenting based on:

• Purchase Frequency: Target frequent buyers with exclusive offers.
• Spending Habits: Offer premium services to high-value customers.
• Engagement Levels: Re-engage dormant customers with tailored incentives.
• Advanced Segmentation: Utilize data analytics to create micro-segments. For example, segmenting customers by their browsing habits or product preferences enables hyper-personalized marketing campaigns.

Having calculated CLV, it can also aid segmentation strategies to further analyse CLV across different groups of customers, be that location, age, products purchased, channels etc.

A healthy CLV-to-CAC ratio ensures profitability. The general benchmark for B2C brands is 3:1, meaning the revenue from a customer should triple the acquisition cost. For example, if your CAC is $100 and the CLV is $300, your ratio is 3:1, that is a sustainable balance. If the ratio drops below this, reassess marketing and acquisition strategies.