LTV

LTV is the total value a single customer brings your store over the whole time they keep buying from you, not just on their first order. It rolls repeat purchases into one figure, so a shopper who orders four times a year counts for four times as much as a one-off buyer.

LTV is not the value of one order, and it is not revenue. People most often confuse it with AOV, which measures a single transaction. LTV multiplies that transaction value by how many times the customer comes back. It is also not profit unless you deliberately calculate it on margin rather than on sales.

The simplest version is average order value multiplied by the average number of orders a customer places. Shopify can give you both from your order history over a fixed window, say 12 or 24 months. Run it on revenue and you get the flattering number, because it ignores product cost, shipping and discounts. Run it on contribution margin instead and you get the honest one: what the customer actually leaves behind after you have paid to fulfil them.

AOV covers one order where LTV covers all of them. CAC is what you paid to acquire the customer, so it is the figure LTV is usually set against. Contribution Margin turns revenue LTV into profit LTV. MER looks at total revenue over total ad spend for a period, rather than following individual customers over time.