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eBay Customer Lifetime Value Estimator

The eBay Customer Lifetime Value Estimator projects the contribution profit an average customer may generate over a chosen relationship period. It combines average order value, gross margin, purchase frequency, retention duration, and ongoing service or retention costs.

Use the estimate to set acquisition budgets, segment customers, or evaluate loyalty efforts. This is a simplified planning model, not a guarantee of future behavior. Cohort-based data generally produces a more useful input than a site-wide average when customer groups have different purchasing patterns.

Calculator inputs

$
%
orders
years
$
$
Result
—
Estimated customer lifetime value
Lifetime revenue—
Lifetime contribution before retention cost—
Lifetime retention cost—
Value after acquisition cost—
LTV to CAC ratio—
Orders needed to recover CAC—

1. Enter average order value
Use net sales per order for the customer group being analyzed.

2. Use a contribution margin
Enter the percentage remaining after variable product, platform, and fulfillment costs.

3. Estimate purchase frequency
Use completed orders per customer per year, not total site orders.

4. Set the customer lifespan
Choose a period supported by retention or cohort history rather than an arbitrary horizon.

5. Include retention cost and CAC
Subtract service or loyalty cost over the lifespan, then compare net value with acquisition cost.

Lifetime revenue = Average order value × Orders per year × Customer lifespan
Lifetime contribution = Lifetime revenue × Contribution margin
Customer lifetime value = Lifetime contribution − Annual retention cost × Customer lifespan

Where:

  • Contribution margin: percentage of order revenue left after variable order costs
  • Customer lifespan: average active relationship duration in years
  • LTV after CAC: customer lifetime value minus acquisition cost

Assumptions: Order value, purchase frequency, margin, and annual retention cost remain constant over the selected lifespan.

What the result means

LTV is estimated lifetime contribution after ongoing retention cost but before acquisition cost.

Forecast uncertainty grows as the assumed customer lifespan becomes longer.

Given:

  • Average order value: $62
  • Contribution margin: 32%
  • Orders per year: 2.4
  • Customer lifespan: 3 years
  • Annual retention cost: $8
  • CAC: $22

Calculation:
Lifetime revenue = 62 × 2.4 × 3 = $446.40. Lifetime contribution = 446.40 × 32% = $142.85. Retention cost = 8 × 3 = $24.00. LTV = 142.85 − 24 = $118.85. Value after CAC = 118.85 − 22 = $96.85.

Result:
$118.85 estimated customer lifetime value before CAC.

Interpretation:
The modeled customer generates about $96.85 after recovering the entered acquisition cost.

Should average order value include shipping and tax?

Use the revenue base that matches your contribution margin calculation. Consistency matters more than a universal convention.

How is customer lifespan estimated?

Use cohort retention history, repeat-purchase intervals, or a churn model. New stores may need a conservative provisional assumption.

Is revenue the same as lifetime value?

No. Revenue does not subtract product, platform, fulfillment, service, or retention costs. This estimator applies a contribution margin and retention cost.

Can LTV be negative?

Yes. High service costs, low margin, or weak repeat purchasing can produce negative value even when gross revenue is positive.

How should I use the LTV-to-CAC ratio?

Use it as a comparison between long-term contribution and acquisition expense, while also checking cash payback time and the uncertainty in the lifespan estimate.