Estimate ecommerce customer lifetime value from order value, frequency, margin and lifespan.
Lifetime value must be computed on gross profit, not revenue, for the comparison against acquisition cost to mean anything. A ratio of three or more is the conventional threshold for scaling spend. Retailers that compute LTV on revenue routinely conclude they can afford three times the acquisition cost they can actually sustain.
Ecommerce LTV
LTV = average order value × orders per year × gross margin × lifespan
LTV = average order value × orders per year × gross margin × lifespan Lifetime value must be computed on gross profit, not revenue, for the comparison against acquisition cost to mean anything. A ratio of three or more is the conventional threshold for scaling spend.
Retailers that compute LTV on revenue routinely conclude they can afford three times the acquisition cost they can actually sustain.
This calculator takes 5 inputs: Average order value, Orders per customer per year, Gross margin, Average customer lifespan, Customer acquisition cost. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.