Lifetime Value and Setting a Marketing Budget

Calculating the lifetime value (LTV) of a customer is a critical step in setting a marketing budget that enables your business to scale effectively. LTV represents the total revenue a customer is expected to generate for your business over the entire duration of their relationship with you. 

By understanding the LTV, you can allocate an appropriate marketing budget to acquire and retain customers profitably. Here’s a step-by-step process to calculate LTV and use it to set a marketing budget:


Step 1: Calculate Average Purchase Value (APV):

Determine the average revenue generated from a single purchase or transaction made by a customer. This can be calculated by dividing the total revenue from all transactions by the total number of customers.


Total Revenue /
Total Number of Customers


Total Number of Purchases /
Total Number of Customers

Step 2: Calculate Average Purchase Frequency (APF):

Find out how often, on average, a customer makes a purchase or uses your service within a specific time period (e.g., annually or monthly).

Step 3: Calculate Customer Lifespan (CL):

Determine the average duration of a customer’s relationship with your business. This can be measured in months or years.

CL =

Average Customer Retention Period (in months or years)



Step 4: Calculate Customer Lifetime Value (LTV):

Now that you have the APV, APF, and CL, you can calculate the LTV using the formula:

Step 5: Set Marketing Budget:

Once you have calculated the average lifetime value of your customers, you can use it to set a marketing budget that enables your service-based business to scale. 

Here are some ways to leverage your LTV to profitably market your business:

By calculating the LTV and setting a marketing budget based on this value, you are well positioned to make informed decisions, optimise marketing efforts, and achieve sustainable growth. 

Remember that these calculations are based on assumptions and historical data, so regularly updating and refining the LTV calculation is essential as your business evolves and market conditions change.

Allocating your marketing budget

Once you’ve got your LTV and can make informed decisions on your marketing budget, the next step is to assess your marketing activities based on the parameters that align with your business objectives and tailor your marketing plan according.

If that’s an area you’d like some assistance with, our team at Vizzably would love to help you review your options and create a clear strategy for the growth of your business.

Want some help?

How’d you go working out your LTV? If you’ve got some questions about this or are keen to see what you can do with your marketing budget, our team are here to help.

Simply complete your details on the form and we’ll be in contact soon.


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