What customer lifetime value is
Customer lifetime value measures how much a customer contributes to the brand over the whole time they keep buying. It can be expressed in revenue or, better, in margin.
It is the metric that changes the conversation about advertising. If you only look at the first purchase, many campaigns look expensive. If you know that customer will buy three more times in two years, the cost of acquiring them looks different.
How to calculate it
There is a simple formula for a first estimate: CLV = average order value × purchases per year × years as a customer × margin. It gives you an idea, but it hides a lot, because it mixes very different customers.
The method we use with brands is cohort-based. Customers are grouped by the month of their first purchase, and you measure how much they have spent on average at 3, 6, 12 and 24 months. That shows whether customers acquired on Black Friday are worth less than those from other months, or whether a campaign brings customers who don’t come back.
- Export orders with customer, date and amount.
- Group by month of first purchase.
- Calculate the average cumulative spend per customer at 3, 6, 12 and 24 months.
- Apply your margin to go from revenue to profit.
- Compare cohorts by acquisition channel.
CLV and acquisition cost
CLV makes sense alongside customer acquisition cost (CAC): what it costs to win a new customer. The relationship between the two tells you whether growth is healthy.
If a customer’s margin value at twelve months doesn’t cover what it cost to acquire them, the brand is growing while losing money, however good the first purchase looks. If it comfortably exceeds it, there is room to invest more in acquisition.
How to raise CLV
CLV moves with three levers: more customers coming back, coming back more often and spending more each time. These are the actions with the most impact in what we see every day.
- A flawless first experience: the second purchase is won in the first.
- Post-purchase and replenishment flows, with the message arriving just when the product runs out.
- A loyalty programme or club with real benefits.
- Subscriptions for repeat-purchase products.
- An app for the most loyal customers.
- Personalised recommendations based on purchase history.
What we have seen
Owned channels are what push customer value the most. At Footdistrict, after the migration, returning customers grew by 28%. At Bulevip, the app went from 4.8% to 13.4% of total revenue.
In subscription brands such as Colvin, Incapto or Talkual, the model is designed for long-term value from the start: the work lies in reducing churn and making every pause or change easy.
Frequently asked questions
What is the difference between CLV and LTV?
None in practice. They are two acronyms for the same thing: customer lifetime value and lifetime value.
How often should CLV be calculated?
A monthly cohort review is enough for most ecommerce businesses. What matters is comparing cohorts and channels, not the number on its own.
What is a good CLV?
One whose margin comfortably exceeds the cost of acquiring the customer. It depends on the sector and the model, so the useful benchmark is your own acquisition cost.
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Retention Manager at Webimpacto. Works with brands that sell online so their customers come back to buy again: apps, loyalty, conversion and repeat purchase measured in sales.