How to Calculate Customer Lifetime Value (CLV) for Shopify

What is Customer Lifetime Value?

Customer Lifetime Value (CLV)—also called LTV—is the total revenue you can expect from a single customer over the entire duration of their relationship with your store.

It's one of the most important metrics in ecommerce because it tells you:

• How much you can afford to spend acquiring customers
• Which customer segments are most valuable
• Whether your retention strategies are working
• The long-term health of your business

The CLV Formula

The basic formula for calculating customer lifetime value is^[1]:

Where:

• AOV (Average Order Value) = Total Revenue ÷ Total Number of Orders
• Purchase Frequency = Total Orders ÷ Total Unique Customers
• Customer Lifespan = Average time a customer continues buying (in years)

Let's break down each component and show you exactly how to calculate it in Shopify.

Step 1: Calculate Your Average Order Value

Average Order Value is the simplest component. In Shopify:

1. Go to Analytics → Reports → Sales over time
2. Select your time period (we recommend 12 months for accuracy)
3. Divide Total Sales by Number of Orders

Step 2: Calculate Purchase Frequency

Purchase frequency tells you how many times the average customer orders from you in a given period^[1].

In Shopify:

1. Go to Analytics → Reports → Customers over time
2. Note your total unique customers for the period
3. Divide your total orders by unique customers

Most ecommerce stores see purchase frequency between 1.0-3.0. If yours is below 1.5, there's significant room for improvement through retention strategies.

Step 3: Calculate Customer Lifespan

Customer lifespan is the trickiest component because it requires historical data. There are two approaches^[2]:

Method 1: Average Retention Period

Calculate the average time between a customer's first and last purchase:

• Export your customer order history
• For each customer, find time between first and last order
• Average these values

Method 2: Churn-Based Calculation

If you know your annual churn rate, use:

Full CLV Calculation Example

Let's put it all together with a real example^[1]:

This store can expect each customer to generate approximately $443 in total revenue over their relationship. This is critical for determining customer acquisition budgets.

CLV:CAC Ratio – The Most Important Metric

Once you know your CLV, compare it to your Customer Acquisition Cost (CAC) to assess profitability^[3].

What's a Good CLV:CAC Ratio?

CLV Benchmarks by Industry

CLV varies significantly by business model and vertical^[4]:

How to Increase Customer Lifetime Value

There are three levers for increasing CLV: AOV, purchase frequency, and lifespan^[1][2].

1. Increase Average Order Value

• Product Bundling

  Create bundles that increase cart value while offering perceived savings

• Upsells & Cross-sells

  Recommend complementary or upgraded products at checkout and post-purchase

• Free Shipping Thresholds

  Set thresholds just above your current AOV to encourage larger orders

• Volume Discounts

  Offer tiered pricing that rewards larger purchases

2. Increase Purchase Frequency

• Post-Purchase SMS & Email

  Stay top-of-mind with timely, personalized follow-up messages

• Subscription Options

  Offer subscribe-and-save for consumable products

• Loyalty Programs

  Reward repeat purchases with points, discounts, or exclusive access

• Replenishment Reminders

  Send automated reminders when products are likely running low

3. Extend Customer Lifespan

• Exceptional Customer Service

  Resolve issues quickly to prevent churn from negative experiences

• Win-Back Campaigns

  Re-engage lapsed customers with targeted offers

• Community Building

  Create emotional connections through social media, content, and events

• Personalization

  Use customer data to provide relevant product recommendations

Free CLV Calculator

Don't want to do the math manually? Use our free Customer Lifetime Value calculator to:

• Calculate your current CLV instantly
• See your CLV:CAC ratio health
• Model the impact of increasing repeat purchases
• Get personalized recommendations

Conclusion

Customer Lifetime Value is the foundation of sustainable ecommerce growth. Without knowing your CLV, you're flying blind on acquisition spend, retention investments, and overall business health.

Key takeaways:

• CLV = AOV × Purchase Frequency × Customer Lifespan
• Aim for a CLV:CAC ratio of at least 3:1
• Focus on all three levers: AOV, frequency, and lifespan
• Post-purchase engagement is crucial for maximizing CLV
• Track CLV over time to measure the impact of retention strategies

For Shopify stores looking to increase CLV, post-purchase SMS upsells are particularly effective—they increase immediate order value while keeping customers engaged for future purchases.