LTV is how much revenue a customer will generate for your store over the entire time they’re purchasing from you. It helps you see the long-term value of keeping a customer happy and engaged.

To calculate LTV, you multiply the average amount a customer spends with you by how often they make a purchase and how long they stay a customer. So, it’s a combination of average order value, purchase frequency, and customer lifespan.

Knowing your LTV helps you understand how much to invest in acquiring customers and how much you can afford to spend on ads or promotions. It helps you focus on high-value customers and build strategies to keep them around.

To improve LTV, focus on customer retention strategies like email marketing (e.g., through Klaviyo), creating loyalty programs, offering personalized recommendations, and providing exceptional customer service. Make it easy for customers to return and purchase again.

LTV is how much you earn from a customer over time, while CAC is the cost it takes to acquire that customer. If your LTV is higher than your CAC, you’re likely running a profitable store.

A good LTV varies, but generally, you’ll want it to be at least 3 times higher than your CAC to ensure you’re profitable. If you’re seeing customers return and spend more over time, you’re on the right track.

Understanding LTV helps you decide how much to invest in acquiring new customers. If your LTV is high, you might want to invest more in ads to bring in new customers. If it’s lower, you’ll focus more on retention.

You can track LTV through Shopify analytics or by integrating tools like Google Analytics or apps like Lebesgue: AI CMO, which track customer behavior and sales over time to help you measure LTV.

By grouping customers into segments like “high LTV,” “medium LTV,” and “low LTV,” you can target your marketing efforts more effectively. For example, you might run special offers for high-value customers or try to re-engage lower-value ones.

Yes, LTV varies by product type and business model. For example, subscription-based businesses often see higher LTV because customers keep coming back for regular orders, whereas one-time purchase businesses may see lower LTV but can increase it by offering upsells or repeat buying incentives.