Estimate the lifetime value of a customer from average order value, how often they buy, how long they stay, and your margin.
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CLV = average order value × purchases per year × customer lifespan in years × gross margin %. It estimates the total profit a typical customer generates over their relationship with you.
CLV tells you how much you can afford to spend acquiring a customer. A healthy business keeps customer acquisition cost well below CLV — a 3:1 LTV-to-CAC ratio is a common target.