What is customer lifetime value?
Customer lifetime value looks beyond the first order. A customer who comes back often may cost more to win than a customer who buys once.
How do you calculate it?
For a group of customers who first bought in the same month, add up the profit after order costs of all their orders in the period after that, and divide by the number of customers. That way you compare groups fairly.
Example: 100 customers first bought in January. In the 12 months after that, all their orders leave €6,000 together after order costs. Customer lifetime value is €6,000 ÷ 100 = €60. If a new customer cost €40, €20 per customer remains.
What to watch out for
Customer lifetime value in revenue always looks better than in profit. Put it next to the cost per new customer: if customer lifetime value is lower, every new customer costs you money.
In Ecommy
Ecommy calculates customer lifetime value in profit after order costs, per group of customers and per channel they came in through.