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How to Perform a Lifetime Value Analysis for Your Shopify Store

Learn how to calculate customer lifetime value for your Shopify store using proven cohort methods, with action points as key takeaways.

Mar 17, 2025

Why Lifetime Value (LTV) Analysis Matters for Your Shopify Store

A strong metric should drive smarter business decisions—and Customer Lifetime Value (LTV) is one of the most powerful insights available to Shopify merchants.

LTV helps store owners understand the total profit a customer generates over their entire journey with the brand. This metric allows businesses to:

Identify loyal customers who generate the highest revenue.
Optimize marketing budgets to lower Customer Acquisition Cost (CAC).
Improve retention strategies to encourage repeat purchases.
Forecast long-term profitability and guide expansion decisions.

For example, let’s say Bob, a Shopify merchant, sells specialty coffee. By analyzing LTV, Bob can determine which coffee flavors sell the most, who his most valuable customers are, and whether launching a subscription model would be beneficial. With this insight, he can target repeat customers more effectively, reducing acquisition costs and increasing revenue.

LTV analysis shifts focus from one-time purchases to long-term profitability, offering a clearer picture of customer value.

How to Accurately Analyze Customer Lifetime Value

We’ve established why LTV is essential, but how do you calculate and analyze it?

LTV is a cumulative metric that relies on past customer behavior. While a basic formula provides quick insights, advanced methods like cohort analysis offer deeper accuracy.

Basic LTV Formulas

Here are two simple ways to calculate LTV:

Revenue-Based Formula:
LTV = Gross Revenue - Costs - Refunds - Discounts
Predictive Formula:
LTV = AOV × Purchase Frequency × Customer Lifespan

For example, if your Average Order Value (AOV) is $50, customers purchase 3 times per year, and the average customer lifespan is 2 years, then: LTV = 50 × 3 × 2 = $300

While these formulas offer a starting point, they lack the ability to track trends over time. This is where cohort analysis comes in.

Why Cohort Analysis is the Best Method for LTV Analysis

Cohort analysis segments customers based on behavioral traits, tracking how different groups interact with your business over time. This method helps identify:

Retention trends—how long customers continue purchasing.
Acquisition efficiency—which channels bring the most valuable customers.
Spending patterns—which segments contribute the most revenue.

For example, you could analyze customers based on:

Acquisition month (e.g., customers acquired during Black Friday vs. summer sales).
Marketing campaigns (e.g., organic vs. paid ads).
Discount usage (e.g., full-price buyers vs. coupon users).

Benefits of Cohort Analysis for Shopify Stores

Breaks vast amounts of data into well-defined groups.
Uncovers spending trends over time.
Helps measure customer retention rates.
Provides actionable insights for increasing LTV.

How to Conduct a Lifetime Value Analysis Using Cohorts

The easiest way to analyze LTV trends in your Shopify store is by using analytics tools like Bloom Analytics, which integrates with Shopify, Google Analytics, Klaviyo, PayPal, and other platforms. These tools allow you to track customer purchase behaviors, segment by cohorts, and make data-driven decisions.

Let’s look at an example:

Understanding Cohort Analysis Data

Imagine your Shopify store acquired 2,534 customers in May 2020 with a CAC of $17 and a retention rate of 36%. The cohort’s LTV started at $121 and increased to $237 over six months. This means that for every $1 spent on acquisition, the store made $14 in return—a highly profitable ratio (ideal CAC to LTV is 1:3).

By analyzing different cohorts:

You can compare seasonal trends (e.g., holiday buyers vs. regular shoppers).
Identify which campaigns drive the most valuable customers.
Optimize pricing and promotions for long-term profitability.

Key Takeaways from Cohort Analysis

Horizontal Analysis: Tracks how customer value changes over time.
Vertical Analysis: Compares how different customer groups perform month-over-month.
Marketing Impact: Helps refine acquisition and retention strategies.

Optimizing LTV for Maximum Business Growth

Once you've analyzed your LTV data, the next step is optimization. Here are some strategies to increase lifetime value:

1. Improve Customer Retention

Offer exceptional post-purchase support.
Provide fast, hassle-free returns.
Send personalized re-engagement emails.

2. Increase Repeat Purchases

Launch a loyalty program with rewards for returning customers.
Introduce product subscriptions for recurring sales.
Upsell complementary products to increase average order value.

3. Target High-Value Customers

Use cohort insights to refine your marketing strategy.
Focus on long-term customer engagement instead of quick wins.
Offer exclusive perks for your most valuable customers.

Best Tools for LTV Analysis on Shopify

1. Shopify Analytics

Provides basic LTV tracking but lacks advanced segmentation.

2. Bloom Analytics

Best for cohort analysis and customer segmentation.

3. Peel Analytics

Automates LTV tracking and real-time retention insights.

4. Lifetimely

Focuses on predictive LTV modeling and revenue forecasting.

5. Polar Analytics

Tracks LTV across multiple acquisition channels.

Final Thoughts: Using LTV Analysis to Scale Your Shopify Store

By leveraging Lifetime Value Analysis, you can make smarter marketing and retention decisions. Instead of chasing new customers, focus on maximizing the value of existing ones.

Track LTV trends with cohort analysis to identify retention patterns.
Optimize CAC to LTV ratio to ensure long-term profitability.
Use LTV insights to refine customer engagement strategies and improve loyalty.

Investing in analytics tools like Bloom Analytics can streamline LTV tracking, helping you make data-backed decisions that drive higher profits and sustainable growth.

Try Bloom Analytics for Advanced LTV Insights

Tracking LTV manually is time-consuming. Bloom Analytics automates the process, providing real-time insights to help you:

Understand customer behavior and spending patterns.
Segment and analyze cohorts for better decision-making.
Refine marketing strategies to maximize customer value.

Sign up for a free trial today and start optimizing your LTV!

Unmatched Expertise and Proven Results

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