Customer Lifetime Value (CLTV) Meaning & Examples
Definition
Customer Lifetime Value (CLTV) is the total revenue a business expects to earn from a single customer throughout their entire relationship with the store. It considers average order value, purchase frequency, and customer retention.
Good or Bad?
Good, when CLTV is high, meaning customers buy often and stay loyal over time.
Bad, when CLTV is low, indicating that customers only purchase once or rarely return.
Why does it matter?
Because CLTV helps businesses understand the long-term value of their customers and make smarter decisions about marketing spend.
A high CLTV means more predictable revenue and sustainable growth.
Common Mistakes
- Focusing only on short-term sales instead of long-term relationships.
- Spending too much to acquire customers without considering retention.
- Not tracking repeat purchase behavior.
- Ignoring upsell, cross-sell, and loyalty opportunities.
How to Improve It?
- Offer loyalty programs and rewards for repeat purchases.
- Use upselling and cross-selling to increase average order value.
- Send personalized follow-up emails and product recommendations.
- Provide exceptional customer service to encourage long-term trust.
Recommended Plugin
Wishlist for WooCommerce by WPFactory.
This plugin increases CLTV by keeping customers engaged with saved products, encouraging repeat visits and purchases over time.
Real-World Example
A WooCommerce coffee subscription store tracks CLTV and discovers that loyal subscribers spend 5x more over a year than one-time buyers. They shift their marketing focus toward retaining subscribers rather than chasing new buyers.
Related Terms
FAQs
How do I calculate CLTV?
CLTV = Average Order Value × Purchase Frequency × Customer Lifespan.
Is CLTV more important than acquisition?
Both matter, but CLTV ensures long-term profitability while acquisition drives growth.
What’s a good CLTV for an eCommerce store?
It varies by industry, but generally, CLTV should be at least 3x higher than the cost of acquiring a customer.
