Lifetime Value (LTV)
Definition
Lifetime Value (LTV) is the total revenue a business expects to earn from a single customer throughout their entire relationship with the store.
It reflects how valuable a customer is over time rather than just one purchase.
Good or Bad?
Good, when it’s high and increasing.
Bad, when it’s low, meaning customers are not returning or spending more.
Why is it matter?
LTV helps you understand how much to invest in acquiring and retaining a customer.
If you know your average LTV, you can set a realistic budget for marketing and support efforts.
It also helps in identifying loyal customers worth nurturing.
Common Mistakes
- Focusing only on one-time purchases
- Ignoring repeat purchase trends
- Not tracking customer behavior over time
- Using LTV metrics without segmenting customers by product or location
How to Improve It?
- Offer loyalty programs
- Use personalized email follow-ups
- Bundle related products and offer upsells
- Improve customer service to encourage repeat business
- Use targeted offers to re-engage past customers
Real-World Example
A WooCommerce store found that subscribers to their email list had double the LTV of non-subscribers.
They invested more in email marketing to grow this high-value segment.
Related Terms
- Customer Retention
- Abandoned Cart
- Average Order Value
- Segmentation
FAQs
How is LTV calculated?
LTV = Average Order Value × Purchase Frequency × Customer Lifespan.
Why is LTV important in WooCommerce?
It shows the long-term value of each customer and helps guide smart business decisions.
How can I increase LTV without spending more on ads?
Improve the post-purchase experience, upsell effectively, and build customer loyalty.
