LTV Calculator

Customer Lifetime Value (LTV) is a metric that estimates the total net profit your business will earn from an average customer over the entire course of their relationship with your brand. It tells you how much a customer is truly worth to you after accounting for costs.

Enter four key metrics from your store's analytics: - Average Order Value (AOV): The average amount a customer spends in a single transaction. - Purchase Frequency: The average number of times a customer makes a purchase from you in one year. - Customer Lifespan: The average number of years a customer continues to buy from you. - Gross Profit Margin: The percentage of revenue that is left after subtracting the Cost of Goods Sold (COGS).

LTV is one of the most critical metrics for sustainable growth. It helps you: - Make Smart Ad Spend Decisions: Your LTV tells you the maximum you can afford to spend to acquire a new customer (your Customer Acquisition Cost, or CAC) and still be profitable. - Focus on Retention: It highlights the immense value of keeping existing customers happy and encouraging repeat purchases. - Identify Your Best Customers: You can segment customers by LTV to identify your most valuable audience and tailor marketing efforts to them.

To increase your LTV, you need to improve one of the core inputs: - Increase Average Order Value: Use strategies like product bundling, upsells, and free shipping thresholds. - Increase Purchase Frequency: Implement email marketing, loyalty programs, and retargeting campaigns to encourage repeat business. - Increase Customer Lifespan: Focus on excellent customer service, build a strong brand community, and create a memorable customer experience.

This calculator uses a foundational and widely accepted model for estimating LTV, which is perfect for most e-commerce businesses to get a strong directional understanding of their customer value. More advanced models exist (e.g., cohort analysis), but this tool provides the essential insights needed for strategic decision-making.