What is customer lifetime value?

Customer lifetime value (LTV or CLV) is the total revenue a business expects to earn from a single customer over the entire duration of their relationship. It accounts for average order value, purchase frequency, and customer lifespan. For ecommerce brands, LTV is the single most important metric for understanding customer profitability and guiding acquisition spend.

How to calculate LTV for Shopify?

The simplest Shopify LTV formula is AOV x Purchase Frequency x Customer Lifespan. You can find AOV in your Shopify Analytics dashboard. Purchase frequency is total orders divided by unique customers over a period. For more accuracy, use cohort-based LTV which tracks actual revenue per customer month-over-month, or predictive models based on early repurchase behavior.

What is a good LTV:CAC ratio?

A good LTV:CAC ratio is 3:1 or higher — meaning you earn $3 in lifetime value for every $1 spent acquiring a customer. A ratio of 5:1 or above is excellent. Between 2:1 and 3:1 is acceptable but thin. Below 2:1 means you are likely losing money on customer acquisition. According to the 2025 DTC Mega Report, the median LTV:CAC across Shopify stores is 2.4x.

Simple vs cohort-based LTV — which should I use?

Simple LTV (AOV x Frequency x Lifespan) is useful for quick estimates but treats all customers as identical. Cohort-based LTV tracks actual revenue from groups of customers over time, showing real retention curves. Use simple LTV when starting out or for rough numbers. Switch to cohort-based with 6+ months of data for significantly more accurate results.

How to increase customer lifetime value?

Five proven strategies: (1) Increase AOV through bundling, upsells, and cross-sells. (2) Improve repurchase rates with post-purchase flows and loyalty programs. (3) Extend customer lifespan by reducing churn. (4) Personalize the experience using purchase history. (5) Build brand community that creates switching costs. Focus on the biggest gap in your current metrics.

Customer Lifetime Value Calculator

Calculate customer LTV three ways: simple average, cohort-based, or predictive. See the revenue curve for each customer over 12 months.