E-commerce Glossary

CLV / LTV (Customer Lifetime Value)

Total value a customer generates over their entire relationship.

LTV estimates the total revenue a customer will bring while they remain active. Simplified formula: LTV = AOV x Purchase Frequency x Customer Lifespan. If a customer spends $60 per order, buys 4 times per year for 3 years, their LTV is $720. Knowing LTV lets you set a profitable acquisition budget and prioritize retention over acquisition.

Related terms

AOV (Average Order Value)Average amount spent per order in your store.See definition ARPU (Average Revenue Per User)Average revenue generated per user over a given period.See definition Blended CACAverage acquisition cost including all marketing channels.See definition Blended ROASOverall return on all advertising spend combined.See definition CAC (Customer Acquisition Cost)Total cost to acquire a new customer.See definition Churn RatePercentage of customers lost over a given period.See definition

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