LTV
Lifetime Value is the ceiling on what you can responsibly spend to acquire a customer. Here's the formula, benchmark ranges by vertical, and why cohort LTV beats the sitewide average.
LTV (Lifetime Value)
The total revenue — or contribution margin — a customer generates across their entire relationship with your store.
LTV (Lifetime Value, sometimes CLV or CLTV) is the cumulative value of a customer from first purchase to churn. It sets the ceiling on what you can responsibly pay to acquire that customer: if LTV is €120 and CAC is €90, every order is fighting for a €30 margin.
The metric only earns its keep when you compute it per cohort — by acquisition month, channel, or first-product SKU — because a sitewide average hides the fact that organic buyers might be worth 3× a Meta-acquired buyer. Most teams report revenue-LTV; finance-grade teams switch to contribution-margin LTV once they have clean COGS.
There are two flavours of LTV worth distinguishing. Revenue LTV is gross — total order value across the relationship — and it's the easiest to pull from Shopify or GA4. Contribution-margin LTV strips out COGS, payment fees, shipping, and returns, leaving the money that actually pays back acquisition spend.
Use revenue LTV for fast directional checks against CAC. Use margin LTV the moment you're making real budget calls, because a 35%-margin apparel SKU and an 8%-margin electronics SKU produce identical revenue LTV and wildly different profitability.
LTV = AOV × Purchase Frequency × Gross Margin % × Customer Lifespan
AOV
Average Order Value
Average revenue per order across the cohort window.
Purchase Frequency
Orders per customer per year
How many times a typical customer buys in a year.
Gross Margin %
Contribution margin
Revenue minus COGS, fees, shipping, returns — expressed as a decimal.
Customer Lifespan
Years a customer remains active
Average years between first and last order (or 1 / annual churn rate).
A mid-size beauty brand on Shopify reviewing its 2023 acquisition cohort.
AOV: €55
Purchase Frequency: 2.4 orders/year
Gross Margin %: 60%
Customer Lifespan: 2.5 years
→ €55 × 2.4 × 0.60 × 2.5 = €198 margin LTV
With a margin LTV of €198, the brand can spend up to roughly €66 per acquired customer to hit a 3:1 LTV:CAC ratio — the usual threshold for healthy unit economics in subscription-adjacent beauty.
Benchmarks vary more by vertical and repeat behaviour than by store size. A category with strong replenishment (skincare, supplements, pet food) will out-LTV a one-purchase category (mattresses, luggage) even at lower AOV. Use the ranges below as a sanity check, not a target.
Typical 24-month customer LTV by e-commerce vertical (revenue, not margin)
| Vertical | Median AOV | Orders / 24mo | 24-month LTV |
|---|---|---|---|
| Beauty & skincare | €48 | 3.8 | €180–€230 |
| Apparel & accessories | €72 | 2.1 | €140–€180 |
| Supplements / health | €55 | 5.2 | €260–€320 |
| Home & decor | €95 | 1.6 | €140–€170 |
| Consumer electronics | €140 | 1.3 | €170–€200 |
| Pet food & supplies | €42 | 6.0 | €240–€290 |
Read the table column by column. Supplements and pet food win on frequency, not basket size. Electronics win on AOV but cap out at one or two purchases. If your store sits well below its vertical band, the lever is almost always repeat rate — second-order conversion, post-purchase email, replenishment reminders — not acquisition.
Frequently asked questions about LTV
3:1 is the widely cited target — LTV three times what you paid to acquire the customer. Below 1:1 you're losing money on every order. Above 5:1 you're usually under-investing in growth and could spend more aggressively.
Use revenue LTV for fast directional checks and margin LTV for any real budget decision. A 60%-margin beauty SKU and a 12%-margin electronics SKU can show identical revenue LTV but produce wildly different profit per customer.
AOV is the value of a single order. LTV is the cumulative value of every order a customer ever places with you. AOV × purchase frequency × lifespan gets you most of the way to LTV — AOV is one ingredient, not a substitute.
A sitewide average blends a 2018 organic buyer with last week's TikTok-acquired buyer, hiding that they behave nothing alike. Cohort LTV — grouped by acquisition month, channel, or first SKU — lets you see which acquisition sources actually compound.
For most stores, 6 months of cohort data gives a reliable repeat-purchase signal and you can extrapolate. For low-frequency categories (furniture, electronics) you need 12–18 months before the curve stabilises enough to act on.
Yes — net returns out of revenue LTV, and net the full cost (refund + shipping + restocking) out of margin LTV. Apparel categories with 25%+ return rates can see margin LTV drop by a third once returns are properly accounted for.
Payback period is the months it takes cumulative margin LTV to equal CAC. A €90 CAC and €15/month margin contribution gives a 6-month payback. LTV tells you the ceiling; payback tells you how fast cash comes back.
Yes. Second-order rate within 60 days is the strongest early predictor — cohorts where 30%+ of buyers reorder in 60 days almost always reach above-vertical LTV. Email subscribe rate at checkout is a weaker but useful secondary signal.
It simplifies it. With subscriptions, LTV ≈ ARPU × gross margin × (1 / monthly churn). The harder part shifts to churn forecasting and dealing with subscribers who pause rather than cancel — pause behaviour distorts naive churn calculations.
Refresh the underlying cohort data monthly, but only revise your planning LTV quarterly. Acting on a single month's noise will whipsaw your acquisition budget. Quarterly cadence catches real trend shifts without overreacting to seasonality.
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