CLV Scenario Simulator
Model and compare customer lifetime value under different churn, pricing, and retention scenarios. Visualize CLV curves over time and identify your most valuable strategies.
Model Your Customer Lifetime Value
Create scenarios to compare how different churn rates, pricing, and retention strategies affect customer lifetime value. Visualize CLV curves over time and identify the most valuable approaches for your business.
Getting Started:
- 1Choose your time basis (monthly, quarterly, yearly)
- 2Add a scenario with ARPU, gross margin, and time horizon
- 3Set churn rate (constant) or custom retention curve
- 4Optionally add a discount rate for present value calculation
- 5Click "Calculate" to see your CLV projections
Pro tip: Add multiple scenarios to compare different strategies side by side. For example, compare your current churn rate vs. what CLV would look like with improved retention.
Understanding CLV Scenario Simulation
What is Customer Lifetime Value (CLV)?
Customer Lifetime Value (CLV) represents the total value a customer brings to your business over their entire relationship with you. It's a critical metric for understanding the long-term financial impact of customer acquisition and retention strategies. By modeling CLV under different scenarios, you can make data-driven decisions about marketing spend, pricing, and customer success investments.
How CLV is Calculated
Net ARPU = ARPU × Gross Margin %
Period Cash Flow = Net ARPU × Active Fraction
Discounted Cash Flow = Period Cash Flow ÷ (1 + Discount Rate)period
CLV (Undiscounted) = Σ Period Cash Flows
CLV (Discounted) = Σ Discounted Cash Flows
The active fraction in each period depends on your churn model. In constant-churn mode, it follows exponential decay: Active Fraction = (1 - Churn Rate)period. In custom-retention mode, you provide the actual retention percentages.
Constant Churn vs Custom Retention
Constant Churn Mode
Assumes a fixed churn rate each period. If 5% of customers churn monthly, retention follows exponential decay: 100% → 95% → 90.25% → 85.74%...
Best for: Stable, mature businesses with consistent churn patterns.
Custom Retention Mode
Allows you to input actual retention percentages from cohort data. This captures patterns where early churn is higher (e.g., 100% → 70% → 60% → 55%...).
Best for: When you have real cohort retention data to model.
The Time Value of Money
A dollar today is worth more than a dollar tomorrow. The discount rate accounts for this by reducing the present value of future cash flows. This is especially important for long customer lifetimes, where cash flows years in the future contribute less to present-day value.
Choosing a Discount Rate
- • Risk-free rate (2-5%): Conservative, government bond yields
- • WACC (8-15%): Your company's cost of capital
- • Required return (15-25%): Target return for investments
Note: For monthly periods, divide annual rates by 12. A 12% annual rate is ~1% monthly.
Strategic Applications
Acquisition Investment
If CLV is $500, you know the maximum you should spend to acquire a customer while remaining profitable. Target CAC:LTV ratios of 1:3 or better.
Retention ROI
Compare scenarios with different churn rates to quantify how much CLV increases when you reduce churn from 5% to 3%. This justifies retention spending.
Pricing Decisions
Model different ARPU levels with their expected churn impacts. Sometimes lower prices with better retention yield higher CLV than premium pricing.
Segment Comparison
Create scenarios for different customer segments (enterprise vs SMB) to understand which segments are most valuable and worth prioritizing.
Important Disclaimer
This tool is for educational and illustrative purposes only. CLV projections are based on simplified models and assumptions that may not reflect real-world conditions. Do not use these calculations as the sole basis for financial, investment, or business decisions. Consult with qualified professionals for specific guidance.
Frequently Asked Questions
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