Cohorts Retention Definitions

Metrics

Defintions

Lifetime Revenue

= Net Sales + Shipping + Tax

Average Lifetime Revenue

= (Net Sales + Shipping Revenue + Tax) / Customers

Lifetime Value. ("LTV", "Cohort LTV")

= Net Sales (Gross Sales - refunds - discounts) - Costs

LTV is the lifetime profit from the customers in a cohort.

Cohort Lifetime Value is the lifetime profit from the customers in a cohort. Cohort LTV is the sum of net sales (gross sales - refunds - discounts) minus the sum of all costs for each cohort. As people purchase more it increases.

When costs of goods sold (COGS) are not available, LTV is effectively the sum of net sales for the lifetime of the cohort.

It is cumulative

Customer LTV. ("CLTV" or "Average LTV")

= [ Net Sales (Gross Sales - refunds - discounts) - Costs ] / Customers

Customer LTV is LTV divided by the number of customers in the cohort. It is profit over time. It takes the total revenue, and subtracts, costs, refunds, discounts and divides that by the total number of customers in the cohort.

It is cumulative

Intro to Cohorts Video

Customer Lifetime Value, usually referred to as LTV (sometimes as CLTV or CLV) measures the profit your business makes from any given customer. The purpose of the customer lifetime value metric is to assess the financial value of each customer, or from a typical customer in case you’re measuring it generally.

Customer lifetime value helps you make important business decisions about sales, marketing, product development, and customer support, such as:

How much should I spend to acquire a customer?
Who are my best customers? How can I offer products and services tailored for them?
How much should I spend to service and retain a customer?
What types of customers should sales reps spend the most time on?

Net Sales

Equates to gross sales - discounts - returns.

Net sales does not include shipping charges or taxes. It will be a positive number for a sale on the date that an order was placed, and a negative number for a return on the date that an order was refunded.

*definition defined by Shopify.

LTV to CAC ratio

Customer Lifetime Value to Customer Acquisition Cost ratio measures the relationship between the lifetime value of a customer and the cost of acquiring that customer with a same day attribution and a blended CAC. The metric is computed by dividing LTV by CAC. It is a signal of customer profitability, and of sales and marketing efficiency. The calculation is the CAC of customers at the time they made a first purchase compared to LTV until today.

Numbers are multipliers so, for example, 2.15 means that LTV is 2.15 times the CAC value. 1.00 would mean the cost = the return. Companies want to strive for numbers larger than 1.00, and 3.00 is a very healthy ratio to reach within 12 months in any cohort.

Cohort AOV per Month

Average Order Value (AOV) per cohort by month.

Discount by Cohort

Total discounts from the customers in a cohort

Refunds by Cohort

Total refunds from the customers in a cohort