2,317 Shopify stores already joined the waitlist! Early access
perks live now.
2,317 Shopify stores already joined the waitlist! Early access
perks live now.
Lifetime value (LTV), also called customer lifetime value (CLV or CLTV), is the total revenue or profit a business can expect from a single customer over the entire span of their relationship. It captures more than a single transaction by combining how much a customer spends per order, how often they buy, and how long they stay. LTV is the metric most often paired with customer acquisition cost (CAC) to decide how much a brand can profitably spend to acquire and retain customers.
LTV is the foundation of long-term unit economics. It tells you whether your acquisition spend is sustainable, where to invest in retention, and which customer segments are worth doubling down on. The most common practitioner shorthand is the LTV:CAC ratio, which compares lifetime value to acquisition cost. A 3:1 ratio is widely treated as a healthy benchmark for ecommerce, meaning each customer returns roughly three times what it cost to acquire them. Below 1:1 means you are losing money on every customer.
A higher LTV means customers are sticking around longer, buying more often, or making bigger purchases. Each of those is a separate lever you can pull, which is why LTV doubles as both a measurement and a strategy framework.
The basic LTV formula is:
LTV = Average Order Value × Purchase Frequency × Customer Lifespan
For a more accurate view of profit (not just revenue), include gross margin:
LTV = AOV × Purchase Frequency × Customer Lifespan × Gross Margin %
For subscription businesses, the most useful variant is:
LTV = ARPU × Gross Margin % ÷ Churn Rate
Churn rate is the single biggest factor that compresses LTV in subscription models, because shorter customer lifetimes shrink the entire calculation.
Because LTV multiplies three inputs, you can grow it by improving any of them:
Of the three, lifespan is usually where subscription brands have the most leverage, since a small reduction in monthly churn compounds heavily over time.
If your average order value is $50, the average customer buys 4 times per year for 3 years, your revenue-LTV is:
$50 × 4 × 3 = $600
If your gross margin is 40%, your profit-LTV is:
$600 × 0.40 = $240
The second number is what actually matters when you compare LTV to CAC, since CAC is paid out of margin, not revenue. To run this on your own store, use LTV calculator.
Read LTV alongside CAC, not on its own. A rising LTV with a faster-rising CAC means your unit economics are getting worse even though the headline number is going up. Segment LTV by acquisition channel, product tier, and one-time vs subscription customer to see where retention work pays back the most, and watch the LTV:CAC ratio over rolling cohorts rather than a single all-time average.
