How To Calculate Shopify LTV (Customer Lifetime Value)?
- Optimizing Marketing Spend: Knowing how much a customer is worth allows you to invest wisely in customer acquisition. If your LTV is significantly higher than your customer acquisition cost (CAC), your business is on a sustainable path.
- Boosting Customer Retention: Identifying high-value customers enables you to create strategies that improve their experience, leading to repeat purchases and long-term loyalty.
- Increasing Profit Margins: By focusing on customers who generate more revenue over time, you can optimize your pricing, upsell strategies, and product offerings to maximize revenue.
- Enhancing Business Forecasting: A well-calculated LTV provides better insight into business growth and helps in long-term financial planning.
- Log in to your Shopify Admin.
- Navigate to Analytics > Reports.
- Under Sales Reports, find Average Order Value (AOV).
- Note this number, as it will be used in the LTV formula.
- Go to Analytics > Customer Reports.
- Open Customers Over Time to see how often customers return
- Use this formula: PF = Total Orders ÷ Total Unique Customers
- Check historical data on repeat customers.
- If unsure, use an industry benchmark (1–3 years for eCommerce).
- AOV = $50
- PF = 3 purchases per year
- CL = 2 years
- LTV = $50 × 3 × 2 = $300
- You get access to real-time reports rather than outdated data in spreadsheets (or your mental math)
- You can enhance your customer acquisition and retention strategies by tracking LTV:CAC ratio.
- Forecast future revenue growth to smartly allocate your marketing budget.
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Content Manager at TrueProfit & eCommerce Marketing Specialist
Irene Le is the Content Manager at TrueProfit, specializing in crafting insightful, data-driven content to help eCommerce merchants scale profitably. With over 5 years of experience in content creation and growth strategy for the eCommerce industry, she is dedicated to producing high-value, actionable content that empowers merchants to make informed financial decisions.
Irene Le is the Content Manager at TrueProfit, specializing in crafting insightful, data-driven content to help eCommerce merchants scale profitably. With over 5 years of experience in content creation and growth strategy for the eCommerce industry, she is dedicated to producing high-value, actionable content that empowers merchants to make informed financial decisions.
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