Customer lifetime value(CLV)
E-commerce
E-commerce
Customer lifetime value is the total margin you earn from an average customer for as long as they stay, not just on the first purchase.
Without this number you steer on the wrong threshold: a first order that loses money can be excellent if that customer returns five more times.
A workable approximation: average margin per order × orders per year × average years a customer stays. Estimate conservatively rather than optimistically.
Related terms
- Customer acquisition costCAC is the total cost of winning one new customer: ad spend plus the people, tools and hours involved.
- ROASROAS is revenue generated by your ads divided by what you spend on them. A ROAS of 4 means €4 revenue per euro spent.
- Average order valueAverage order value is revenue divided by number of orders. Alongside traffic and conversion rate it's the third lever you can pull.
- RetentionRetention is the share of customers who keep buying over time. Its opposite is churn: the share that leaves.