Customer Lifetime Value (CLV or LTV) is the total revenue a customer generates over their entire relationship with your business. It's the most important metric for sustainable growth.
The CLV Formula
CLV = Average Order Value × Purchase Frequency × Customer Lifespan
Example: - Average order value: $65 - Purchases per year: 3 - Average customer lifespan: 2.5 years - **CLV = $65 × 3 × 2.5 = $487.50**
Each customer is worth $487.50 over their lifetime. This means you can afford to spend up to $487 to acquire them and still break even.
CLV Benchmarks by E-commerce Niche
| Niche | Avg CLV | Avg Lifespan |
|---|---|---|
| Fashion & Apparel | $350-600 | 2-3 years |
| Beauty & Skincare | $500-1,200 | 3-5 years |
| Health Supplements | $600-1,500 | 2-4 years |
| Pet Products | $400-800 | 3-5 years |
| Home & Kitchen | $200-500 | 1-3 years |
| Electronics | $300-700 | 2-4 years |
Why CLV Matters for Ad Spend
Most sellers judge ad profitability on first-purchase ROAS. But if a customer buys 4 more times, that "unprofitable" ad campaign might actually be your best investment.