On this page
Customer Lifetime Value (LTV) — The total revenue or profit a business can expect from a single customer over the entire time they keep buying.
What Is Customer Lifetime Value?
LTV looks past the first sale to estimate what a customer is worth across every future order, referral, or repeat purchase, not just the transaction that first brought them in.
How to Calculate LTV
A simple formula: Average Order Value × Purchase Frequency × Customer Lifespan.
LTV vs. Customer Acquisition Cost (CAC)
| LTV | CAC | |
|---|---|---|
| What it measures | Total value a customer brings over time | Cost to win one customer |
| Goal | Keep it high | Keep it low |
| Healthy relationship | LTV should exceed CAC by a comfortable margin | |
Why LTV Matters for Dropshippers
Judging a customer’s value only by their first order misses the point for any store with repeat buyers. A customer who comes back several times can justify a higher acquisition cost than a one-time buyer.
FAQ
How is LTV different from average order value?
AOV measures a single order, while LTV estimates the total value across every order a customer makes over their entire relationship with the store.
Why does LTV matter if I only sell one product?
Even a single-product store benefits from repeat buyers, referrals, or add-on purchases, all of which raise LTV beyond what a single order suggests.
How can I increase LTV?
Email marketing, retargeting past customers, and offering complementary products are common ways to encourage repeat purchases and raise LTV.