Why Customer Lifetime Value (LTV) Matters for Your Ecommerce Brand

What Is LTV, Really?

Customer Lifetime Value (LTV) is the total amount of money a customer is expected to spend with your brand over the course of their relationship with you. Not just what they spend today. Not what they might spend if they say, really loved your Valentine’s Day sale, but instead their full lifetime value.

Why LTV Is the Metric That Matters

Most ecommerce brands are laser-focused on ROAS which can be a reflection of just the first conversion: get the click, get the sale, high-five the team. But if you’re only measuring success by the first purchase, you’re only seeing one chapter of the story and you’re limiting your growth and profitability.

LTV zooms out. It shows you how valuable a customer actually is over time - and that’s the number you want to build your strategy around.

For starters, it helps you set realistic Customer Acquisition Cost (CAC) targets. If your LTV is $350, you can afford to spend $100 or even $150 to acquire a customer and still come out ahead. But if your LTV is only $60 and you’re dropping $90 on paid ads? That’s not a business - that’s a bonfire.

Short-Term ROAS vs Long-Term Profit (LTV at Work)

You sell a product with an average Lifetime Value (LTV) of $350.

You spend $100 on ads to acquire a new customer.

On the first purchase, the customer buys a product worth $70.

Your initial Return on Ad Spend (ROAS) is:

$70 ÷ $100 = 0.7x

(You’re losing money on the first sale.)

At first glance, that looks like a bad deal.

But here’s the bigger picture:

• That same customer receives your welcome email flow.
• A week later, they return and buy a bundle worth $120 (email cost: $0.01).
• After a few weeks they see a retargeting ad for $10 and they spend another $160. Blend customers don’t need to worry about this.
• Over 3 months, they’ve spent $350 and you’ve spent only $110 to get and keep them.

Your true blended ROAS over time becomes:

$350 ÷ $110 = 3.18x

Now you’re profitable and scaling smart.

Some subscription heavy brands even opt out of first order profitability in the name of aggressive new customer acquisition. In the example above their CAC (Customer Acquisition Cost) is $100, at first glance you might hear alarm bells, but after realising that the new customer has returned to purchase again from you, that $100 CAC is actually healthy and quite profitable.

LTV also tells you where your leaks are. Low LTV often points to a retention problem, a lack of repeat purchases, site conversion issues, poor email flows or perhaps post sale service.

Where to Find the Numbers

To calculate LTV, you’ll need a few data points - most of which you already have.

Start with your Average Order Value, which your ecommerce platform (like Shopify) likely shows right on your dashboard. Purchase frequency can be calculated by dividing the number of orders by the number of unique customers over a time period - say, the past 12 months. For customer lifespan, you can look at historical purchasing data to see the average time between a customer's first and last order. If you're a newer brand, make an educated estimate based on your category - consumables like skincare or pet food usually have higher lifespans than big-ticket items like mattresses.

You can also export your raw orders - and use an LLM like ChatGPT “Using this export of my customers from my ecommerce store calculate the lifetime value per customer”.

You can also try more purpose built SaaS tools like Lifetimely.io.

Pro tip: If you're just getting started and don’t have a ton of data, start simple and refine as you grow. LTV is a living metric - it should evolve as your business does.

How to Grow Your LTV (Without Working Twice as Hard)

The good news? LTV isn’t fixed. It’s something you can improve. And when you do, every customer becomes more valuable - without increasing your ad spend.

Start by improving the post-purchase experience. Make sure customers feel appreciated, informed, and excited to buy again. A thoughtful email flow, fast shipping, or even a small surprise in the box can go a long way.

Next, look for ways to increase repeat purchases or increase AOV. Offer bundles, subscriptions, or reorder nudges based on past behaviour. Think like Amazon’s “buy again” button - but smarter and more personal.

Segment your audience. High-value customers might warrant a VIP experience, while new customers might need a little extra love before they’re ready to commit.

Talk to your customers. We always say it isn’t just about the ads. The best brands are talking to their customers constantly via all of their social channels.

And most importantly - plug the holes. If customers are churning after one purchase, find out why. Poor product experience? Shipping issues? Confusing returns? Call them - ask them, you’ll be surprised by the results. Every fix adds up.

In a world of vanity metrics - likes, impressions, 5x ROAS screenshots - LTV is one metric that really matters. It gives you clarity, direction, and confidence to grow a business that lasts.

The ecommerce brands that scale sustainably aren’t just the ones who win the first sale. They’re the ones who make every customer count - again and again.

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