- Enter average order value
Use net merchandise revenue per order after discounts.
- Add annual purchase frequency
Estimate how many completed purchases the average customer makes each year.
- Set the customer lifespan
Use the average active relationship length in years.
- Enter gross margin
Use revenue minus product cost as a percentage of revenue.
- Interpret the estimate
Compare gross-profit LTV with CAC while allowing for overhead, returns, and discounting.
Physical Product Customer Lifetime Value Estimator
This estimator projects the gross-profit value generated by an average physical-product customer over the relationship.
Retail teams can use the estimate to set acquisition limits, compare customer segments, and test how order frequency, retention, and product margin affect long-term economics.
Enter your values
Result
—
Estimated customer lifetime value
Lifetime revenue—
Gross margin—
Annual gross profit—
Lifetime revenue = Average order value × Purchases per year × Customer lifespan
LTV = Lifetime revenue × Gross margin rate
This simple historic model assumes order value, frequency, and margin remain constant through the stated lifespan. Gross margin is entered as a percentage and converted to a decimal.
What the result means
The main result estimates gross profit contributed by one average customer before acquisition cost and operating overhead.
A cohort or discounted cash-flow model may be more appropriate when retention or margins change materially over time.
Given
A specialty retailer has an $85 average order, 3.2 purchases per year, a 2.5-year customer lifespan, and a 42% gross margin.
Calculation
Lifetime revenue = $85 × 3.2 × 2.5 = $680.
LTV = $680 × 0.42 = $285.60.
Result
Estimated gross-profit customer lifetime value is $285.60.
Is this revenue LTV or profit LTV?
The main result is gross-profit LTV. Lifetime revenue is shown separately in the breakdown.
Should shipping revenue be included in average order value?
Include it only if your AOV and margin treatment are consistent. Pass-through shipping charges can distort comparisons if their costs are omitted.
How do returns affect the estimate?
Use net order value and a margin based on retained sales, or adjust the inputs using observed post-return data.
Can lifespan be less than one year?
Yes. Enter a decimal, such as 0.5 for six months.
Why might cohort LTV differ from this result?
Cohort models observe retention and spending over time. This estimator holds frequency, value, and margin constant.