9 min read

What Is Shopify Customer Lifetime Value And How Is The Easiest Way To Calculate It

Published on
May 10, 2023
Gabriele Rucinskaite
Marketing Executive
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To succeed in the competitive e-commerce market of today, it is important to recognise the importance of every customer. Online sellers can estimate how much money each client will bring in over the course of their whole association with the business using the Customer Lifetime Value (CLV) statistic.

The health of your online store may be determined by looking at the Shopify customer lifetime value. It indicates the overall sum of money a customer will spend on the products or services you provide throughout the course of their transactions with your business. It is essential to comprehend your CLV since it gives you knowledge of the long-term profitability of the customers you serve and enables you to make wise choices about your marketing, advertising, and customer retention tactics.

The average order value, frequency of purchases, and customer retention rate are just a few of the variables that go into calculating the Shopify CLV. With the right tools and information, it is comparatively easy to determine client lifetime value, despite its seeming complexity.

In this article, we'll walk you through the process of calculating Customer Lifetime Value, discuss its importance, and offer advice on how to make it better. You will know exactly how to determine your Shopify CLV and apply it to expand your e-commerce business by the time you finish reading this blog.

What exactly is Customer Lifetime Value or CLV?

Customer lifetime value (CLV), also known as lifetime customer value (LCV), is a measure of the total revenue a company may expect from a customer over the course of their association with the business. It is an essential aspect of customer relationship management and an essential measure of the customer's long-term worth.

How do you calculate Customer Lifetime Value?

The method used for calculating customer lifetime value (CLV) varies based on the type of business and industry. However, the following is the general formula for computing CLV:

CLV = (Average Order Value) * (Number of Repeat Sales) * (Average Customer Lifespan)

The steps for calculating the CLV are as follows:

  • Identify the average order value

Find out how much a customer typically spends on each purchase. Divide the whole revenue from all purchases by the total quantity of orders.

  • Determine the total number of repeat purchases

Find out the typical number of times a consumer makes a purchase from the company during a certain time period.  This may be computed by dividing the total number of orders by the total number of different customers.

  • Identify the average customer duration

Calculate the average duration of a customer's loyalty to the company. This can be done by dividing the total number of customer relationships by the number of different customers.

  • Multiply the three factors

To calculate customer lifetime value, multiply the average order value, the number of recurring customers, and the average customer longevity.

For instance, the CLV would be as follows if the average order value was £60, there were 5 repeat purchases, and the typical customer lifespan was 3 years:

CLV = £60 * 5 * 3 = £900

It is important to be aware that there can be other aspects, such as profit margins and client acquisition costs, that must be considered when calculating CLV. However, the fundamental method mentioned above offers a place for businesses to start when figuring out the worth of their customers.

What is the importance of Customer Lifetime Value or CLV?

  • Strategy when it comes to making decisions

CLV helps businesses in making good decisions regarding their marketing, sales, and customer service initiatives. Companies can use CLV to segment their customer base and create focused marketing strategies to retain high-value customers.

  • Effective Marketing

Businesses can evaluate how much customers spend on gaining new customers by analysing Customer Lifetime Value. This allows them to better spend their marketing budget and focus on gaining clients with a high CLV.

  • Customer Loyalty

CLV may help firms in determining which customers are likely to leave and which are the most valuable. Businesses may reduce loss and boost customer loyalty by focusing on maintaining high-value clients.

  • Product innovation

CLV can also assist businesses in determining which items and services are the most profitable and popular with their customers. This data can be used to create new products and services that are more likely to attract high-value customers.

How can you boost your Customer Lifetime Value or CLV?

Businesses may use a variety of strategies to boost Customer Lifetime Value.

  • Enhance the customer experience

Excellent customer service can help you build strong relationships with your consumers and get their loyalty. This involves reacting quickly to customer enquiries and concerns, making personalised recommendations and offers, and offering a consistent experience across all touchpoints.

  • Provide customer loyalty programmes

Loyalty programmes can encourage customers to do transactions with a business again and enhance their lifetime value. Giving loyal customers exclusive discounts, rewards, or personalised experiences can help create brand loyalty and retention.

  • Upselling and cross-selling

Encourage customers to buy more items or services to boost their lifetime value. This can be accomplished by making personalised recommendations, bundling products, or providing complimentary products or services.

  • Building strong relationship

Customer lifetime value can be increased by developing strong relationships with customers. This can be accomplished through personalised communication, the distribution of personalised offers and discounts, and the development of a sense of community around a brand.

  • Concentrate on retention

Customer retention may boost client lifetime value. This includes detecting consumers who are about to leave and offering customised rewards to keep them engaged, as well as providing great customer service to maintain existing customers.

  • Provide excellent after-sales service

Providing outstanding after-sales care can assist you to boost client loyalty and lifetime value. This means offering warranties, providing timely and efficient service, and rapidly addressing any problems or issues.


To summarise, boosting Customer lifetime value is an essential approach for businesses aiming to establish a sustainable customer base and increase income. Applying the suggestions in this article can increase customer satisfaction and lifetime value.

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