LTV (Lifetime Value), or customer lifetime value, is the revenue or margin a customer generates for a store over the whole period they keep buying from it. It tells you how much, on average, it is worth winning and keeping a customer.
There are two common ways to calculate it. The historical method adds up what each customer has spent over a defined period and takes the average per customer. The predictive method estimates future value from average order value, purchase frequency and the average length of the customer relationship. For investment decisions it is more useful to base LTV on gross margin rather than revenue alone, because margin is what pays for acquisition.
In eCommerce, LTV becomes meaningful when set against customer acquisition cost (CAC). If LTV is low relative to what it costs to win a customer, growth through paid ads is hard to sustain. Post-purchase and win-back email flows, loyalty programmes and a good delivery experience are common ways to raise LTV.
On WooCommerce
Order history linked to the customer’s email address is the basis of the calculation. Guest checkouts should be grouped by email so that repeat purchasing is not underestimated.