1,800 is the example result. This simplified LTV multiplies order value, purchase frequency, margin and lifespan. It does not discount future cash flows or model changing retention.
This simplified LTV multiplies order value, purchase frequency, margin and lifespan.
Separating campaign efficiency from business profit
This simplified LTV multiplies order value, purchase frequency, margin and lifespan. It does not discount future cash flows or model changing retention. Campaign ratios depend on the event being counted. A click, a submitted form, a qualified opportunity and a paying customer are separate outcomes. Combine spend and events from the same campaign window before comparing acquisition costs.
Source and result record
For client ltv, retain Average order value, Orders per year, Gross margin, Customer years together with the output. Record the date of the source values and the unit convention used in the form. That record separates a change in the underlying case from a change in how the information was entered. A saved result without its source values cannot show which assumption produced it.
Example with the supplied inputs
Average order value: 250; Orders per year: 4; Gross margin: 60; Customer years: 3. Result: 1,800. The values are illustrative.
Compare one changed input
Average order value changes from 250 to 275. The result becomes 1,980. All other inputs remain fixed.
Calculation rule
Result = [Average order value] × [Orders per year] × ([Gross margin] ÷ 100) × [Customer years]
Inputs and output
| Input | Example value | Entry convention |
|---|---|---|
| Average order value | 250 | Use the source quantity represented by average order value. Keep the counted population fixed and avoid mixing a unit value with a period total. |
| Orders per year | 4 | Use the source quantity represented by orders per year. Keep the counted population fixed and avoid mixing a unit value with a period total. |
| Gross margin | 60 | Enter gross margin on the percentage scale used in the formula (20 means 20%, not 0.20). Keep its base and reporting period consistent with the other inputs. |
| Customer years | 3 | Use the duration unit stated in customer years. A time period is not interchangeable with a currency amount or a count of events. |
Output: 1,800 is the example result. This simplified LTV multiplies order value, purchase frequency, margin and lifespan. It does not discount future cash flows or model changing retention. Use the formula to distinguish a cash amount, count, percentage or ratio.
How to use the page
Collect the inputs
Gather Average order value, Orders per year, Gross margin. Use one period and the units shown in the form.
Run the calculation
Enter the values and select the action. The calculation rule above explains how the inputs produce the result.
Compare a scenario
Change Average order value on its own, keeping the other inputs fixed. Read both results before changing another assumption.
Worked example
With the example inputs listed above, the result is 1,800.
Change Average order value from 250 to 275 while keeping every other value fixed. The result becomes 1,980. This comparison isolates that input; it does not forecast how other variables will respond.
Check the stated formula, units and limits before using the result in a decision.
Keep the displayed formula, input units and model scope with the result. Corrections or questions can be sent through the request section on this page.
Content updated: October 11, 2026