Question 1

How do you calculate customer lifetime value?

Accepted Answer

The simple LTV formula is: AOV × Purchase Frequency × Customer Lifespan. For example, $65 AOV × 3 orders/year × 2.5 years = $487.50 revenue LTV. Multiply by gross margin to get profit LTV. This calculator also shows churn-based and DCF-adjusted models for more accuracy.

Question 2

What is a good LTV for ecommerce?

Accepted Answer

There's no universal benchmark — it depends on your industry and margins. What matters is the LTV:CAC ratio. A 3:1 ratio (LTV is 3x your CAC) is considered healthy. For Shopify stores, typical LTVs range from $100-$500, with subscription brands often reaching $500-$2,000+.

Question 3

What is the difference between revenue LTV and profit LTV?

Accepted Answer

Revenue LTV is total lifetime spend (AOV × orders × lifespan). Profit LTV subtracts COGS to show actual gross profit generated. Always use profit LTV when comparing to CAC — a $500 revenue LTV with 40% COGS is only $300 in gross profit. If your CAC is $100, your real LTV:CAC is 3:1, not 5:1.

Question 4

How does churn rate affect LTV?

Accepted Answer

Churn directly determines customer lifespan: Lifespan = 1 / Churn Rate. At 5% monthly churn, average lifespan is 20 months. At 3% monthly churn, it's 33 months — a 65% increase in LTV. Reducing churn by even 1-2% can dramatically increase lifetime value and is often cheaper than acquiring new customers.

Question 5

What is DCF-adjusted LTV?

Accepted Answer

DCF (Discounted Cash Flow) adjusts LTV for the time value of money. A dollar received 2 years from now is worth less than a dollar today. At a 10% discount rate, a $300 profit LTV might only be worth $260 in present value. This is more accurate for businesses planning investments or comparing to upfront acquisition costs.

Free Customer Lifetime Value (LTV) Calculator

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