Find out what a customer is really worth over their lifetime, in revenue and in profit, and the most you can afford to spend to acquire one. Use it to set smarter ad budgets.
Customer lifetime value (CLV) is the total profit a customer brings over the whole time they keep buying from you. Knowing it turns guesswork about marketing into maths: if a customer is worth ₹3,000 in profit over their lifetime, you know roughly how much you can spend to win one and still come out ahead. It also shows why keeping customers is usually cheaper than chasing new ones.
Lifetime revenue = average order value x orders per year x lifespan in years. Lifetime value (profit) = lifetime revenue x gross margin %. A practical maximum acquisition cost is about one third of lifetime profit, which leaves a buffer for other costs and the profit you want to keep.
A customer spends ₹800 an order, buys 6 times a year, stays for 3 years, and your gross margin is 40%. Lifetime revenue is 800 x 6 x 3, which is ₹14,400. At 40% margin the lifetime profit is ₹5,760. Spending up to around ₹1,900 to acquire that customer still leaves a healthy return.
It is the total profit one customer brings over all the time they buy from you, not just their first purchase. It helps you decide how much you can spend on marketing and how much to invest in keeping customers happy.
A common guideline is to keep acquisition cost to about a third of lifetime profit, so the customer is comfortably profitable. If a customer is worth ₹6,000 in profit, spending up to roughly ₹2,000 to win them is usually sound.
Look at how long customers typically keep buying before they go quiet. If you do not track this yet, start with a sensible estimate such as 2 to 3 years and refine it as you gather data on repeat purchases.
It shifts focus from one-off sales to long-term value. A modest average order can still make a very valuable customer if they buy often and stay loyal, which is why loyalty programs and good service often beat constant discounting.
Commmerce loyalty, offers, and marketing tools help you raise repeat purchases and lifetime value across every store and channel.
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