Understanding how to calculate customer lifetime value (CLV) is essential for profitable ecommerce. CLV tells you how much revenue each customer will bring over their entire relationship with your brand. It guides budgeting, acquisition, and retention strategies. A standard ecommerce formula is:

CLV = Average Order Value × Purchase Frequency × Average Customer Lifespan

Using this formula helps you make better marketing decisions and optimize return on ad spend.

3 Steps to Calculate CLV

Determine Average Order Value (AOV)

AOV = Total Revenue / Total Orders (e.g., $100,000 ÷ 2,000 orders = $50).

Calculate Purchase Frequency

Purchase Frequency = Total Orders / Total Customers (e.g., 2,000 orders ÷ 400 customers = 5).

Estimate Average Customer Lifespan

Average Lifespan = Sum of customer lifespans ÷ Number of customers, or use 1 ÷ churn rate.

Then:

CLV = AOV × Purchase Frequency × Average Customer Lifespan

Example: $50 × 5 × 5 years = $1,250 CLV per customer.

Advanced CLV Formulas & Profit-Based Models

To go deeper:

• Include Gross Margin: Adjust CLV by multiplying by profit margin. For example, $750 revenue CLV becomes $450 profit CLV at 60% margin.
• Use Discounted CLV: CLV = (Gross Profit × Retention Rate) ÷ (Discount Rate − Retention Rate).

These methods help with planning around cash flow and profitability.

Benchmarks & Ratios

• Typical ecommerce CLV ranges between $100–$300.
• A healthy CLV-to-CAC (customer acquisition cost) ratio is around 3:1.
• Omnichannel shoppers can have 30% higher CLV.

How Clerk.io Helps Maximize CLV

• Boost AOV with AI-powered product recommendations and upsells.
• Increase Purchase Frequency by sending targeted emails (e.g., abandoned carts, back-in-stock) and reminders.
• Extend Customer Lifespan using smart segmentation to re-engage at-risk customers or reward loyalty.
• Optimize ROI: Monitor CLV to acquisition spend directly in Clerk.io’s dashboards.

Use Our Tools to Unlock CLV Fast

• Audience Segmentation
• Smart Product Recommendations
• Email Automation
• AI Search Engine