E-commerce Customer Lifetime Value Calculator
Calculate customer lifetime value (CLV/LTV), gross profit LTV, and the vital LTV:CAC ratio based on repeat purchase frequency, AOV, and customer lifespan.
Healthy (>3.0x recommended)
Customer Lifetime Value Formula
Annual Value = AOV × Purchase Frequency; Revenue LTV = Annual Value × Lifespan; Profit LTV = Revenue LTV × Gross Margin %; Ratio = Profit LTV / CAC- Average Order Value (AOV): Average dollar amount spent per purchase.
- Purchase Frequency: Number of orders an average customer places per calendar year.
- Customer Lifespan: Average number of years a customer continues buying before churning.
- Gross Profit LTV: Actual gross profit dollars generated by a customer over their entire relationship.
- LTV:CAC Ratio: Compares customer profit lifetime value against the cost to acquire them (target is 3:1 or higher).
Step-by-Step Worked Example
Calculation Steps:
How to Use This Calculator
Assumptions & Limitations
- Does not represent a guarantee of future customer retention.
- Excludes inflation adjustment on future cash flows.
Frequently Asked Questions
Why is Gross Profit LTV better than Revenue LTV?
Revenue LTV ignores product manufacturing and shipping costs. A customer generating $500 in revenue with a 20% margin only produces $100 in profit, making an $80 CAC barely viable.
What is a healthy LTV to CAC ratio for e-commerce?
A 3:1 ratio is widely regarded as the gold standard in direct-to-consumer e-commerce. A 1:1 ratio means you are breaking even on customers, while a 5:1+ ratio indicates you could aggressively scale ad spend.
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