Customer lifetime value (LTV, or CLV) is the total revenue you expect to receive from a customer over the entire duration of their relationship with your business.
It’s the answer to: what is a customer actually worth? Not just their first order, but all their orders, renewals and upgrades over time. LTV shapes decisions about how much you can afford to spend acquiring customers, which customers to prioritise for retention and whether a pricing change will help or hurt long-term.
Key takeaways
- LTV = average order value × purchase frequency × average customer lifespan
- LTV is most useful as a ratio against customer acquisition cost (CAC), the LTV:CAC ratio is a core health metric
- For subscription businesses, LTV is primarily determined by churn rate
- LTV is a prediction, not a precise figure, it’s useful for directional decisions, not exact accounting
- Improving LTV is usually cheaper than increasing acquisition volume
How LTV is calculated
The basic formula for ecommerce:
LTV = average order value × purchase frequency × average customer lifespan
Example: a WooCommerce store where customers spend €65 per order on average, buy 3 times per year and stay customers for 2.5 years on average.
LTV = €65 × 3 × 2.5 = €487.50
For subscription businesses, the calculation simplifies:
LTV = average monthly revenue per customer ÷ monthly churn rate
Example: customers pay €29/month and monthly churn is 3.5%. LTV = €29 ÷ 0.035 = €829
Both are approximations. Real LTV calculations often adjust for gross margin (so you’re measuring profit, not revenue) and apply a discount rate to account for the time value of future revenue. For most small businesses, the simpler formula is accurate enough to be directionally useful.
LTV vs CAC: the ratio that matters most
LTV on its own is just a number. Its real usefulness is in relation to your customer acquisition cost (CAC), how much you spent (in marketing, ads and sales) to acquire a customer.
The LTV:CAC ratio is one of the most-cited benchmarks in subscription and ecommerce:
| LTV:CAC ratio | What it suggests |
|---|---|
| Below 1:1 | You’re losing money on every customer |
| 1:1 to 2:1 | Breaking even or barely profitable, not sustainable |
| 3:1 | Generally considered healthy |
| 5:1+ | Strong unit economics, room to invest in growth |
A 3:1 ratio means you earn three times what you spent to acquire a customer. This leaves room for overhead, product development and reinvestment while remaining profitable.
If your LTV:CAC is below 2:1, you have two levers: increase LTV (retain customers longer, increase purchase value) or decrease CAC (improve targeting, conversion rates, organic channels).
What drives LTV
LTV is a product of three factors, any of which can be improved:
Average order or subscription value. Increasing what customers spend per transaction directly raises LTV. Upsells, bundles and premium tier conversions all move this number. See average order value for how to track and improve it.
Purchase frequency. For non-subscription ecommerce, how often customers come back matters as much as what they spend each time. Email marketing, loyalty programmes and relevant re-engagement campaigns drive repeat purchase behaviour.
Customer lifespan (or inverse: churn rate). For subscription businesses, this is the biggest lever. A customer who stays for 3 years is worth roughly three times one who stays for 12 months. Reducing monthly churn by 1 percentage point can meaningfully increase LTV across your entire customer base.
LTV for WooCommerce stores
In ecommerce, LTV calculations need to account for the irregular purchase patterns of different customer segments.
A customer who buys consumable products (coffee, skincare, supplements) on repeat has a very different LTV profile than one who buys a high-ticket item once. Calculating LTV by product category or customer segment is more useful than a single store-wide average.
Practical things to measure:
- Average first-order value vs subsequent order value (repeat buyers often spend more)
- Time between first and second purchase (the strongest predictor of whether a customer will buy again)
- Percentage of customers who make a second purchase within 60 days (a useful activation benchmark)
LTV for WooCommerce subscription products
For WooCommerce Subscriptions or Easy Digital Downloads, LTV is directly tied to how long subscribers stay active. At a churn rate of 3% per month, the average subscriber stays for roughly 33 months. At 6%, they stay about 17 months.
The formula LTV = monthly ARPU ÷ churn rate makes this concrete: if you’re charging €49/month and average churn is 4%, LTV = €49 ÷ 0.04 = €1,225. Cut churn to 2% and LTV nearly doubles to €2,450, without changing pricing at all.
Burst Pro’s subscription analytics shows subscriber retention, cancellation trends and revenue metrics alongside each other inside WordPress. You can track how changes to onboarding, pricing or product affect the underlying retention numbers that determine LTV.
FAQs
Nothing, they’re the same metric, just abbreviated differently. LTV (lifetime value) and CLV (customer lifetime value) are used interchangeably. Some contexts use CLTV. All three mean the same thing.
For strategic decisions, profit-based LTV (which subtracts cost of goods sold and other direct costs) is more accurate. Revenue-based LTV is simpler to calculate and useful for directional comparisons. Be consistent when comparing LTV across time or segments, and be clear which version you’re reporting.
Use your best estimates as inputs and revisit as data accumulates. For churn-based LTV, you can use early cohort retention data. If customers who signed up 3 months ago are still 85% active, extrapolate forward with some caution. Early LTV estimates are less accurate but still useful for setting initial acquisition spend limits and pricing decisions.
Focus on the biggest lever first. For subscription businesses, that’s almost always retention (reducing churn). For ecommerce, it’s usually driving the second purchase. Customers who buy twice are far more likely to buy a third time. Identify where in the customer journey you’re losing people and work backwards from there.
Know what your customers are actually worth
LTV tells you how much a customer relationship is worth over time. Burst Pro tracks subscription revenue, retention and purchase behaviour inside WordPress, without sending your customer data anywhere.
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Related definitions: what is churn rate, what is MRR and what is average order value.
