Customer Lifetime Value (LTV) is the total revenue a customer is expected to generate over their entire relationship with your store. It accounts for repeat purchases and customer retention over time.
Customer Lifetime Value (LTV) is the total revenue a customer is expected to generate over their entire relationship with your store. It accounts for repeat purchases and customer retention over time.
LTV = Average Order Value × Purchase Frequency × Customer Lifespan LTV shifts your thinking from individual transactions to long-term customer relationships. A customer who buys once for £50 is worth far less than one who buys three times a year for five years. Knowing your LTV tells you the maximum you can spend to acquire a customer while remaining profitable. Stores with high LTV can outbid competitors on ads because they know each customer will pay back the acquisition cost many times over.
LTV = Average Order Value × Purchase Frequency × Customer Lifespan Your average customer spends £45 per order, buys 3 times per year, and remains active for 2.5 years. Your LTV is £45 × 3 × 2.5 = £337.50. This means you could theoretically spend up to £337 to acquire this customer and still break even.
LTV is the foundation of sustainable growth. If you only look at first-order profitability, you will underinvest in acquisition and lose to competitors who understand long-term customer value. The LTV-to-CAC ratio is one of the most important metrics in ecommerce.
Calculating LTV based on optimistic retention assumptions instead of actual data
Ignoring that different customer segments have vastly different LTVs
Using revenue-based LTV instead of profit-based LTV, which overstates true customer value
StoreLyst calculates LTV using your actual customer purchase data, showing you real repeat purchase rates and customer lifespans. You can segment LTV by acquisition channel to see which sources bring the most valuable customers.
A 3:1 LTV-to-CAC ratio is generally considered healthy, meaning each customer generates three times what it cost to acquire them. Below 1:1 means you are losing money on every customer. Above 5:1 may indicate you are underinvesting in growth.
Focus on repeat purchases through email marketing, loyalty programmes, and excellent post-purchase experience. Increase AOV through upsells and bundling. Extend customer lifespan by building brand loyalty and solving replenishment needs.
Profit-based LTV is more accurate because it reflects the actual value a customer brings after costs. Revenue-based LTV is simpler to calculate but can mislead you into overspending on acquisition. Use profit-based LTV when making CAC decisions.
You need at least 6–12 months of order data to estimate purchase frequency and retention reliably. New stores can start with industry benchmarks and refine as data accumulates. The more historical data you have, the more accurate your LTV calculation.
Stop calculating in spreadsheets. Get real-time ltv tracking for your Shopify store.