Measuring what produces clients

LTV · Customer lifetime value

In plain terms

What a customer brings you over the whole relationship, not just on their first purchase.

Formula

Technical meaning

It is calculated in margin, not revenue: average margin per order multiplied by the average number of orders per customer over a period, often twelve months, measured on your own customers. Compared with acquisition cost, it tells you how much you can spend to win a customer without losing money. Contrast calculates it on the real customer base before raising an acquisition ceiling.

Formula

LTV = average margin per order × average number of orders per customer over the period

Read: the maximum CAC of an online store

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