📊 Mastering LTV: Your Guide to Valuing Customer Relationships

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Understanding the value of your customers is like having a compass for your business's success.

That's why today's newsletter is dedicated to one of the most crucial metrics for your store's growth: Customer Lifetime Value (CLTV or LTV).

It's not just about a single sale; it's about the full journey you share with your customers.

Let's dive in!

Why Does Customer Lifetime Value (CLTV) Matter?

Simply put, CLTV is the total value a customer brings to your business during the entire time they buy from you.

The basic formula looks like this:

CLTV = (Average Purchase Value x Purchase Frequency) x Average Customer Lifespan

Calculating your CLTV Profit can be overwhelming because Shopify does not give you a simple answer.

We created a simplified version of a CLTV Profit calculator that you can use to get an idea of what your CLTV Profit is.

This calculator does not give you the gospel but it does give you a very good projection of what your CLTV Profit is.

To get a highly accurate CLTV you need a software like https://www.lifetimely.io/ and you have to learn about complicated things with weird names like “Cohorts.”

But if you want CLTV Profit at a glance, today is your day!

How to Know Your CLTV

Now, let's break down how you can calculate this vitally important number that is your brand's heartbeat.

Five Steps to Easily Calculate CLTV (Editable Spreadsheet Link)

1. Average Order Value (AOV): Start by dividing your total revenue by the number of purchases over a certain period.

2. Purchase Frequency: Next, find out how often customers make a purchase by dividing the number of purchases by the number of unique customers.

3. Customer Value: Multiply the average purchase value by purchase frequency to get your customer value.

4. Deduct COGS (Cost of Good Sold) and Shipping costs.

5. Deduct CAC (Customer Acquisition Cost - Paid Ads, Affiliates, Influencers, etc.).

Hang in there if you’re feeling a little overwhelmed, we promise it’s not that bad, and knowing this number is ESSENTIAL for know how to win with paid ads.

Go ahead and crunch the numbers.

Calculating CLTV Profit is a journey worth taking for the sake of your store's future, and we're here to help guide you every step of the way.

1. Click this link to copy the CLTV Google Sheet 

2. Once you make a copy and bookmark it, Open your Shopify Analytics Dashboard.

3. Input all the numbers from your store into the CLTV Calculator that are Blue

The data that is currently there is from a real store. It will give you an idea of what your numbers could look like.

But What Does It Mean?

Here’s why it REALLY matters…

The higher that you can get your CLTV, the more PROFIT you are able to put in your pocket.

If you want to make more money from your store, increase your CLTV.

In many ways, this is the single most simple answer to the question “How do I make more money that I get to keep from my store?”

The answer: increase your CLTV.

So let’s make some more money…

5 Simple Ways To Increase CLTV

1. Subscriptions

2. Product and Brand Awareness email content like our Money Printing Automation.

3. Adding new products to your store.

4. Cross Selling other products to customers after they purchase through email campaigns or using a tool like ReBuy.

5. Add a loyalty program. EVERY Shopify store should have a Loyalty Program. We recommend Smile.io.

Use this CLTV Calculator as a starting point for figuring your CLTV.

You definitely should consider an app like https://www.lifetimely.io (not affiliated) for more advanced reporting if you’re ready for that step.

Keep an eye out for more insights and tools from ShopBytes to help your store thrive!

Wishing you endless growth,

Your ShopBytes Team 📈

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