Calculate the Customer Lifetime Value (CLV) for shops on Shopify (practice).

The real problem in life

E-Commerce businessmen, online store owners on Shopify or all marketers! Have you ever felt "eight -sided" when deciding to budget marketing? For example, "How much should be used to find a new customer?", "How much is a customer who has come to our business?" Or the most painful is "Why do we find a lot of new customers? But the profit is not as grown as you think? "

Many people tend to focus on "Looking for new customers" as the main, without looking deeply that each customer How much "create value" for our business in the long run This is the "trap" that makes many e-commerce business miss out on sustainable growth opportunities. Or sometimes use the budget to go wrong until the loss without knowing it

You may have a headache with these questions, right?

• Do not know how to invest in finding a new customer (Customer Acquisition Cost - CAC), how much is it worth it?
• Not sure if the promotion or campaign stimulates the repeated purchase that is "worth" or "not worth"?
• Would like to divide customers into groups To take better care But don't know what criteria to use?
• Lack of in-depth information for long-term strategic planning for e-commerce business?

If you are encountering a situation like this ... You are not alone! This problem is something that many online store owners have to face. But don't worry Because today we will come with a "key" important to help you see "Real value" of each customer And use that information to plan a business wisely, that is the calculation of Customer Lifetime Value (CLV) for Shopify ! Which is the key to the Ecommerce Optimization Audit

Photos: E-Commerce operators are holding a temple in front of a computer that shows unrelated budget numbers and sales. Represents concerns about marketing decisions

Why did that problem occur?

[cite_start]

Most problems that we encounter do not know the value of customers. Or the use of marketing budgets without direction Often have the main cause from "Lack of in -depth information" and "incomplete viewing" of each customer Let's see why this problem occurs often. Especially with the upper store Shopify [cite: 20]:

• 1. [Cite_start] Focus but "Buy for the first time" does not look at "Value of Life": Most stores are happy to be the first sales of new customers. But did not follow how many more customers will come back to buy and how much income for us, during the time he is our customer [Cite: 20]
• 2. [Cite_Start] Lack of tools or knowledge in "including information": Shopify has many trading information. But to pull those data together to calculate the CLV, it is necessary to understand or use tools. Which many people may not know where to start Or what tools do you use? [Cite: 20]
• 3. [Cite_start] Data analysis at "Too complicated": Sometimes, just hear the word "CLV" feels difficult. Must use a complex formula Must be a statistical player Which causes many people to be discouraged and do not dare to start [Cite: 20]
• 4. [Cite_Start] Do not really see the "importance" of CLV: many people are not aware that the knowledge of CLV is "magic power" that will change your E-Commerce business perspective forever. Because it is an indicator that says how much "invest" with a customer is worth [Cite: 20]

These reasons make us unable to truly see the "overall" of the business. And making business decisions are difficult and high risky. Understanding the Customer Lifetime Value will be an important aid.

Prompt Image: Image showing scattered data (customer sales graph) on the computer screen And there is a question mark around. The user shows the confusion of data management.

If left, how will it affect?

Ignoring the calculation of Customer Lifetime Value (CLV) is not just a "unknown" issue. But it is to let your business move forward like "without direction" and have a very high "risky". Let's see if we still don't care about CLV, what will happen to your Shopify store:

• 1. [Cite_Start] "The marketing budget ... without knowing it": You may be too high to find a new customer (CAC) without knowing that the customers who have received may create less than the cost you lost. Resulting in long -term losses [Cite: 20]
• 2. [Cite_start] "Lost a good customer ... Unfortunately": When you don't know which customer is "Golden customers" that create enormous value You will not be able to take care of or offers appropriate privileges to them. Causing this group of customers to feel not bound and move to competitors [Cite: 20]
• 3. [Cite_start] "Marketing strategy 'Guess' ... not accurate ": Lack of CLV makes you not knowing what strategy should be used to increase sales or stimulate purchase repeatedly. Every decision will depend on the guess. Which is at risk of failure [Cite: 20]
• 4. [cite_start] "Profit 'Shrink' ... despite the sales look good ": You may see the total sales look high. But if the cost of obtaining customers and taking care of those customers higher than the value they created in the long run In the end, your net profit will be less or not. [Cite: 20]
• 5. [Cite_start] "missed the opportunity 'Sustainable growth': A strong business is a business that knows the value of customers. And able to plan to increase the value of each customer continuously. Not knowing the CLV is therefore completely blocking this opportunity. [Cite: 20]

Not knowing the CLV is like driving without a oil gauge. And you have no way to know when the car will run out in the middle of the way. It's time for us to attach this "gauge" to your Shopify store and learn how to use it to determine the better strategy for your business. And if you need additional guidelines for managing marketing strategies, look at the ideas for making Personalization for your E-Commerce customers.

Prompt picture: A picture of a boat that is sailing in the sea without compass or a map. Represents a business that lacks directions and is facing risks.

Is there any solution? And where should it start?

Okay! [cite_start] When we know how dangerous it is to know It's time for us to see that What is this "solution" and where should you "start from" to calculate the Customer Lifetime Value for your Shopify shop professionally? [Cite: 20]:

[cite_start]

The main heart is: "CLV calculation" and "Using data" [Cite: 20]

[cite_start]

Step 1: Data Preparation [Cite: 20]

• Specify the time you want to calculate: Do you want to calculate the CLV in the 1 year, 3 years, or 5 years ago? Determining the time period will help the calculation more accurate.
• Draw data from Shopify: You will have to use each customer's order information, which includes:
  • Customer code (Customer ID)
  • Order date
  • Order value
  • Number of order (Number of Orders)
  You can export these information from the "Customers" or "Order" in Shopify Admin.

[cite_start]

Step 2: Select the right CLV formula [Cite: 20]

[cite_start]

There are many ways to calculate the CLV, but for the E-Commerce stores on Shopify that require easy and real use. We recommend 2 main formulas. [Cite: 20]:

Formula 1: CLV Simple (Historical CLV)

Suitable for businesses that are just starting Or need a quick overview

$$ \ Text {CLV (Historical)} = \ Text {Income from each customer} $$

or

$$ \ text {CLV (Historical)} = \ Text {average purchase value per} \ times \ text {amount purchased} $ $

[cite_start]

Calculation method: [Cite: 20]

1. Calculate AORAGE Order Value (AOV): all the total sales Divided by the total order
2. Calculate Purchase Frequency (PF): Bring the total order. Divided by the number of unique customers
3. Calculate Customer Value (CV): Bring AOV to multiply with PF (this is the value that customers create for you for a moment, such as per month/year).
4. Calculated CLV: Bring CV with Customer Lifespan (the average time that customers are still your customers).

[cite_start]

Formula 2: Clv predictive CLV [CITE: 20]

Suitable for businesses that require future estimates. And has enough information

$ \ Text {CLV (Predictive)} = \ Text {average valu (AOV)} \ Times \ Text {Purchase Frequency (PF) Margin (PM)} $$

[cite_start]

Explain each variable: [Cite: 20]

• AOV (AORAGE Order Value): The average value of each order (total sales / number of orders)
• PF (Purchase Frequency): The number of customers buying average per time period (All orders / number of customers are unique)
• Customer Lifespan): The average time that customers are still your customers (such as 3 years, 5 years)
• PM (Profit Margin): Your net profit margin (net profit / income)

[cite_start]

Step 3: Use tools for CLV CALCUTATION [CITE: 20]

• Google Sheets/Excel: It is a basic tool that you can use the data from Shopify and then calculate with the above formula.
• Apps in Shopify App Store: There are many apps that help calculate the CLV and display in Dashboard immediately, such as Lifetimely, Repeat Customer Insights.
• Advanced Analytics Platform: For example, Google Analytics 4 (GA4) also has features that help to analyze the customers' Lifetime Value as well. Learning the GA4 manual for E-Commerce is important.

[cite_start]

Step 4: CLV Using Actionable Insights [Cite: 20]

• Set up a CAC budget: When you know CLV, you will know how much you can spend on finding each new customer.
• Customer Segmentation: Customers with high CLV for special care And a group with low CLV to find a strategy to stimulate the purchase repeatedly
• Retention Strategy: Design membership program, special discounts, or communication that meets customers with high CLV.
• Strategic improvement UPSELL/CROSS-SELL: When knowing which customers are likely to buy more Can design upsell and cross-sell strategies efficiently

The beginning may seem like there are many steps. But guarantee that the results will be "worthwhile" and "change your game" for sure! [cite_start] and this is the beginning of sustainable sales [Cite: 20] or you may use Hubspot: How to Calculatime Value as an additional guidelines as well.

PROMPT Image: Infographic images show simple CLV calculation procedures, starting from data collection, formula selection, use of tools And use

Examples from the real thing that used to be successful

[cite_start]

In order not to be just theory I would like to give an example from the real experience of "Health Supplement" on Shopify that has experienced similar problems and using CLV calculations to help turn the situation. [Cite: 20]:

[cite_start]

Previous situation: This shop invested in advertising (Facebook Ads) to find a lot of new customers. They have a lot of traffic to the website. Sales seem to be good. But when coming to the end of the month, it was found that "net profit" did not grow as expected [Cite: 20]

[cite_start]
• Problems encountered: They don't know how much each customer has come. Resulting in a "spinning" advertisement, but the number of Lead does not focus on the quality of the customer, making CAC (cost of finding customers) too high and many new customers buy only once and then disappear. [CITE: 20]

What to do:

[cite_start]
1. Calculate the CLV with Shopify information: They use the 2 -year -old order information from Shopify to calculate the Clv of each group of customers using the forecast CLV formula to see how much each customer will make them in the long term. [Cite: 20]
[cite_start]
2. Divide the customer group according to CLV: When the CLV has received the customer into 3 groups: CLV customers, CLV customers, medium, and high CLV customers [Cite: 20]
3. Adjust the marketing strategy according to CLV:
   • Low CLV customers: Reduce the budget for finding this group of customers. And try to find a new potential new customer group
   • Medium CLV customers: create a repeated purchase campaign, such as discount coupons for the 2nd purchase, points accumulation programs.
   [cite_start]
   • High CLV customers (gold customers): "Create" VIP membership program "provides special privileges such as special discounts, birthday gifts, access to new products before anyone else, and more Personalize. [Cite: 20]

Results:

[cite_start]

After adjusting the strategy according to the CLV only 6 months. "The total sales increased by 30%" and more importantly "Net profit increased by 50%!" [Cite: 20] [Cite_Start] They can reduce CAC by 20% because they know what kind of customer should be invested. And can increase the purchase rate of the CLV customers up to 45% [Cite: 20] This is the power of knowing Clv and the use of data for real!

Prompt Image: Pictures of E-Commerce business that shows a graph of profits and sales that are clearly rising after using the CLV to show the success of entrepreneurs.

If wanting to follow, what to do? (Can be used immediately)

Come to the most important part! [cite_start] If you read it here and "ready" that will use the Customer Lifetime Value (CLV) calculation technique to use your Shopify store immediately. This is a simple "Checklist" that you can follow. [Cite: 20]:

[cite_start]

Step-By-Step Guide: Calculate CLV by yourself (can be used immediately) [Cite: 20]

1. Enter your Shopify Admin system: Go to the "Customers" or "Order".
2. Export all customer information: Choose the time you want to analyze. (Recommended 1-2 years to get enough information) and export data in the form of CSV.
3. Open the CSV file with Google Sheets or Excel: You will get each customer's order information.
4. Create a new column to calculate:
   • "Total Spend Per Customer": Use the Sumif or Pivot Table formula to combine all the spending of each customer.
   • "Number of Orders Per Customer": Use the Countif or Pivot Table formula to see the number of times each customer ordered.
5. Calculate AORAGE Order Value (AOV):
   • (For everyone) = Total sales / amount of all orders
6. Calculate Purchase Frequency (PF):
   • (For everyone) = All purchase orders / number of unique customers
7. Customer Lifespan (CL) estimate:
   • You may use the experience from experience. Or look at the average information about how many years your customers are still buying (such as 1 year, 3 years). If there is no clear information Start at 1 year and then gradually adjust when there is more information.
8. Calculate profit margin (PM) of your business:
   • (For everyone) = (Total income - Cost of goods sold - Operating expenses) / total income (as percentage)
9. Calculate the CLV (Predictive) of your business:
   • When getting AOV, PF, CL, and PM, bring to formula: $$ \ text {clv (Predictive)} = \ text}} \ Times {PF} \ Times {CL} \ Times \ Text}}}}}
10. Apply the Clv to adapt:
    • Use the CLV values ​​that are "ceilings" in the CAC budget.
    • Try to divide the customers into tier (such as high CLV, medium, low) and plan different care or promotions.
    • Consider investment in the subscription to increase the CLV in the long run.

Don't be afraid to start doing it! Although the numbers in the first period may not be 100% perfect, but you have "acted" and "understand". This process will allow you to see the opportunity to improve your shopping business enormous. And if wanting more help You can consult Ecommerce Optimization Audit experts of Vision x Brain

Photos: The user image is using the Spreadsheets (Excel/Google Sheets) program that opens the Shopify data screen and is inserting the CLV calculation formula, indicating the actual action.

Questions that people tend to wonder And the answers that are cleared

After we have learned how to calculate the CLV together, I believe that many people may have "questions" Some doubts, which are normal! [cite_start] I have compiled a common question about CLV calculation for Shopify stores with answers that "easy to understand". [Cite: 20]:

[cite_start]

Q1: How often do I have to calculate the CLV? [Cite: 20]

[cite_start]

A: Recommend to calculate at least "1 quarter" or "2 times a year". [Cite: 20] [cite_start] so you see the trend and impact of marketing strategies. Or if your business has important changes (such as new products, change prices, making big campaigns) should be calculated again to see the results. [Cite: 20]

[cite_start]

Q2: If I don't have information back for a long time, can I calculate the CLV? [Cite: 20]

A: Yes! [cite_start] If you just start a business and not have enough information, you can use "CLV easily (Historical CLV)" from the available data. [Cite: 20] [cite_start] or try the customer life and purchase Frequency from the same type of business in the market. To be used to calculate the preliminary Clv first. [Cite: 20] [Cite_Start] Not much information is not an excuse to not start! [Cite: 20]

[cite_start]

Q3: How much should the CLV value be? [Cite: 20]

[cite_start]

A: There is no fixed number for the "best" CLV "because it depends on your business type, industry, and profit margin. [Cite: 20] [Cite_start] is the important thing is" Customer Lifetime Value to Customer Acquism. [CITE_START] generally. The right ratio is 3: 1 or higher. [Cite: 20] [Cite_Start] (means CLV should be 3 times the CAC). If your CLV/CAC is less than 1: 1, that is the danger that you are losing from finding a new customer. [CITE: 20]

[cite_start]

Q4: Shopify App Store. Is there any app to help calculate the CLV? [Cite: 20]

[cite_start]

A: There are many apps that are interesting and help you not to calculate yourself. [Cite: 20] [cite_start] For example, Lifetimely, Repeat Customer Insights, or Segment by Tresl [CITE: 20] [Cite_START] These apps often have beautiful dashboard and display other data. Which is also beneficial to the E-Commerce business. [Cite: 20] [Cite_Start] Try to search in the Shopify App Store! [Cite: 20]

Do you still have any questions? Do not hesitate to study and do continuously so that your Shopify shop grows sustainably!

Photos: Large Q&A icon icon with icon, users are curious and calculator icons. Represents the solution of calculations

Summary to be easy to understand + want to try to do

How are you? [cite_start] Hope this article will help solve the questions and make you see the image "Customer Lifetime Value (CLV)" is not a distant matter. Or is just a complex marketing number. [Cite: 20] [Cite_Start] But it is "heart". It is important to help you understand. "Real value" of each customer And use that information to plan the E-Commerce strategy on Shopify like "accurate" and "more effective" [Cite: 20]

Remember: Knowing CLV will make you:

[cite_start]
• Investment in marketing budgets wisely: no longer has to guess how much budget should be used to find new customers [Cite: 20]
[cite_start]
• Take care of customers directly. Point: Can divide the customer group and design the customer care program that is valuable. [Cite: 20]
[cite_start]
• Sustainable profit: not just sales growth But the profit also grows as well. [Cite: 20]

[cite_start]

It's time for you to "Change perspective" from focusing only on the first sales Come to see "Value of life" of each customer [Cite: 20] and I believe you can do it! [cite_start] Start today with exports from Shopify and try to calculate the CLV by yourself. [Cite: 20] [cite_start] You may be "surprise" with the in -depth information you will receive [Cite: 20].

Don't wait! [Cite_Start] "Golden opportunity" in making your Shopify "grow" leaps are waiting for you! [cite: 20] [cite_start]

Calculate the CLV today ... and you will see your future e-commerce business more clearly than before! [Cite: 20]

If you feel that the calculation and use of data are still challenging Or need a professional to help "unlock" the highest potential to your Shopify shop. Don't hesitate to Consult the e-commerce optimization expert of Vision x Brain for free! [Cite_Start] No obligation! We are ready to be a partner and help your business soar forward firmly! [Cite: 20]

Prompt image: CLV graph image that has continuously risen. Represents business growth With icons, coins and parcel boxes. Shopify communicates the increased profit from the CLV understanding.

‍