Customer lifetime value (LTV) is the total profit you expect from a customer over their relationship with your store.
How to calculate it
A simple version is average order value × average number of orders per customer × gross margin. Cohort-based LTV is more accurate: track how much each group of customers spends in the months after their first order.
Use LTV to set acquisition budgets
If a customer is worth $200 in profit over a year, spending $60 to acquire them can be a great deal, even if the first order loses money. Compare LTV with acquisition cost by channel to see where to invest.
Increase LTV
- Follow up first orders with helpful post-purchase emails.
- Recommend the products that lead to repeat purchases.
- Offer subscriptions or replenishment reminders for consumables.
FCAnalytics calculates lifetime value by channel, first product and segment, and shows the payback period for every acquisition source.