What is a customer worth to my store?
Last updated
Your average order value, from your store reports.
Display only. Your figures are read in the currency you pick — nothing is converted and no exchange rate is applied.
Enter your average order value, how many orders a customer places in a year and how many years they keep buying. There is no lifetime figure until all three are supplied.
- Average order valueNeeded
- Orders a year and years of buying, or your repeat purchase rateNeeded
- Gross margin, which turns revenue into what a customer can pay forRecommended
Take the lifetime gross profit to the CAC calculator to see whether what you pay for a customer pays back. Not sure of your margin? Work it out after Shopify fees.
This is an estimate built from your own inputs. No benchmark lifespan, repeat rate or margin is used. The currency is a label only and nothing is converted; the worked examples further down stay in US dollars.
Nothing you type is sent anywhere. There is no account, no install and no store connection.
Orders, lifespan, margin and the price of a customer
Customer lifetime value is the gross profit a customer leaves you across every order they place, so a shopper who spends 60 dollars twice a year for three years at a 55 percent gross margin is worth 198 dollars to the store.
No benchmark is used: the lifespan, repeat rate and margin are all yours, so the result is an estimate built from them rather than a published figure. To see whether what you pay for a customer fits inside it, take the lifetime gross profit to the CAC calculator.
Four inputs you already have, and one figure that tells you what you can spend to win a customer. The inputs are yours, so the answer is an estimate built from them, not a prediction.
- Average order value (AOV)
- What a customer spends on a typical order, before refunds are taken off. Use the AOV of returning orders if you know it: reorders are often smaller or larger than a first basket.
- Lifetime orders
- How many orders one customer places before they stop buying. You can give it as orders a year and years of buying, or as the share of customers who come back for another order — a 40 percent repeat rate works out at about 1.7 orders per customer.
- Lifetime gross profit
- The part of all that revenue left after the cost of the goods. This is the figure to compare with customer acquisition cost, because it is the money that can pay for acquisition. Lifetime revenue is shown as well, and it is the wrong number to set a CAC ceiling against.
- First-order gross profit
- The gross profit on a single order. If you need every customer to pay back what they cost on their first purchase, this is the most you can pay; the lifetime figure is the most you can pay if you can wait.
Nudgesmart is available on the Shopify App Store. Browse the template library or see what it costs.
What a customer is worth, and the most you can pay for one
Illustrative arithmetic in US dollars, not customer data. Every row comes from the same function the calculator above runs.
| Scenario | AOV | Repeat | Margin | Lifetime orders | Lifetime revenue | Lifetime gross profit | First order |
|---|---|---|---|---|---|---|---|
| Apparel, two orders a year for three years | $60 | 2 a year for 3 years | 55% | 6 orders | $360.00 | $198.00 | $33.00 |
| Coffee subscription, monthly for two years | $32 | 12 a year for 2 years | 40% | 24 orders | $768.00 | $307.20 | $12.80 |
| Furniture, one big order | $650 | 0.5 a year for 1 year | 35% | 1 order | $650.00 | $227.50 | $227.50 |
| Skincare, 40 percent come back | $45 | 40% come back | 70% | 1.7 orders | $75.00 | $52.50 | $31.50 |
| Electronics accessories, 20 percent come back | $28 | 20% come back | 30% | 1.3 orders | $35.00 | $10.50 | $8.40 |
| Pet food, 75 percent reorder | $55 | 75% come back | 35% | 4 orders | $220.00 | $77.00 | $19.25 |
| Jewellery, a gift every other year for six years | $120 | 0.5 a year for 6 years | 60% | 3 orders | $360.00 | $216.00 | $72.00 |
Where a lifetime value estimate goes wrong
Lifespan is the input people guess
AOV and margin come from your reports; how long a customer keeps buying usually does not. A young store has not been open long enough to know, so treat the result as a range: run it with a short lifespan and a long one and plan on the lower figure.
An average customer is nobody
A handful of loyal buyers can carry the average while most customers order once. If your best cohort and your typical one differ a lot, work them out separately — the typical one is what an acquisition budget buys.
Gross margin is not the whole cost
Shipping you absorb, payment fees, returns and the discount on the first order all come out of each order before it is profit. Put a margin in that already allows for them, or the lifetime figure is too high.
Money later is worth less than money now
A customer who pays you back over five years ties up cash that a customer who pays back on the first order does not. The lifetime figure here is not discounted for time, so the longer the lifespan, the more it flatters.
Customer lifetime value questions
How do you calculate customer lifetime value?
Enter your average order value, how often a customer orders and for how long, and your gross margin, and the calculator returns lifetime revenue and lifetime gross profit per customer. At 60 dollars an order, two orders a year for three years and a 55 percent margin, a customer is worth 360 dollars in revenue and 198 in gross profit.
Should CLV be revenue or profit?
Profit, when you are deciding what to spend to win a customer. Revenue tells you how big a customer is; gross profit tells you what they can pay for. The calculator shows both, and the acquisition figures are built on gross profit.
I do not know how long customers stay. What should I enter?
Switch to the repeat purchase rate: the share of customers who have placed a second order. Your store reports it, and it is usually easier to find than a lifespan. If you have neither, run the calculator with one year and again with three, and treat the gap as the uncertainty.
How much can I spend to acquire a customer?
The calculator gives a range. At the low end is the gross profit on one order, which is the most you can pay if every customer has to pay back on their first purchase. At the high end is the lifetime gross profit, which you only earn back if customers stay as long as you assumed. The CAC calculator shows where your current cost sits against it.
How can I raise customer lifetime value?
Give customers a reason and a way to come back. A shopper who leaves an email address on the first visit can be reached for the second order without paying for the click again, which lifts lifetime orders without touching AOV or margin.
Does this tool need my store or an account?
No. It runs in the page with numbers you type, and nothing about your store is sent anywhere.
A lifetime is only as long as your way back to the customer.
Nudgesmart captures the email on the first visit with a popup targeted on real on-site behaviour, and reports revenue per signup so you can see what each address is worth.
