How to Calculate LTV of a Customer for eCommerce Brands

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Customer Lifetime Value (LTV) is one of the most powerful metrics for eCommerce brands, but often one of the most misunderstood. While many marketers are laser-focused on acquisition and conversion rates, the smartest operators know that the real game is retention. Getting a customer to buy once is great. Getting them to come back again and again? That’s the real goldmine of profit.

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In this article, we’ll break down exactly how to calculate LTV, how it connects with your CAC (Customer Acquisition Cost), and why getting this equation right is essential for long-term profitability. Whether you’re running a $1M DTC brand or scaling past $20M, understanding your LTV is pivotal in taking your business to the next level.

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We’ll cover:

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• What LTV is and why it matters
  
  
• The basic customer LTV formula
  
  
• Advanced eCommerce-specific calculations
  
  
• How to calculate LTV:CAC ratio
  
  
• How Conjura can help you achieve this
  
  
• Actions you can take today to boost your customer LTV
  
  

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Let’s get stuck right in!

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What is Customer LTV and Why It Matters

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Customer Lifetime Value (LTV or CLV) is the total amount of revenue a customer is expected to bring to your business during their relationship with your brand. In other words, it answers the question: How much is a customer worth to you over time?

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This number is crucial for eCommerce brands because it helps you:

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• Determine how much to spend on customer acquisition
  
  
• Forecast long-term revenue and growth
  
  
• Identify your most valuable customers
  
  
• Build loyalty and retention strategies
  
  
• Measure marketing channel performance
  
  

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When acquisition costs (ads, influencers, SEO, content) are rising, it’s no longer enough to just make a sale, you need to ensure that sale leads to more sales (a bit of a tongue twister I know!). A customer who spends $100 with you once may not be worth acquiring if you spent $80 to get them. But if they come back five times over the next 12 months? That’s a whole different story.

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This is why LTV, and especially the LTV:CAC ratio, is at the heart of profitable growth strategies for modern DTC and marketplace brands.

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The Basic LTV Formula for eCommerce

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The simplest way to calculate customer LTV is:

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LTV = Average Order Value × Purchase Frequency × Customer Lifespan

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Let’s break that down:

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• Average Order Value (AOV): How much does the average customer spend per order?
  
  
• Purchase Frequency: How many times do they buy from you each year?
  
  
• Customer Lifespan: How long (in years) does the average customer stay active?

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Example:

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Let’s say your store data shows:

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• AOV = $60
  
  
• Purchase frequency = 3 orders per year
  
  
• Customer lifespan = 2 years
  
  

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Then the LTV = $60 × 3 × 2 = $360

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This means, on average, each customer is worth $360 in gross revenue over their lifetime.

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Pro tip: Use cohort data to calculate more accurate purchase frequency and lifespan. Don’t rely on intuition, pull the actual data from your platform (Conjura makes this simple).

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Going Deeper: Advanced LTV Calculations for eCommerce

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While the simple formula is a great starting point, it doesn’t tell the full story, especially if you want to understand profitability. That’s where we move from revenue to margin-based LTV.

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Here’s a refined formula:

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LTV = AOV × Purchase Frequency × Customer Lifespan × Gross Margin

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This version includes your gross profit margin, giving you a clearer picture of what each customer contributes to your bottom line.

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Example:

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Say your AOV is $80, purchase frequency is 2, lifespan is 4 years, and your gross margin is 50%.

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LTV = $80 × 2 × 4 × 0.5 = $320

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This is the profit you make from an average customer, not just the revenue. Much more useful when making decisions about acquisition costs or retention investments.

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For Subscription or Retention-Heavy Brands

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You might prefer a different formula:

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LTV = (ARPU × Gross Margin) ÷ Churn Rate

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Where:

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• ARPU = Average Revenue Per User per month
  
  
• Churn Rate = % of customers lost per month
  
  

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If your ARPU is $30/month, your margin is 60%, and churn is 5%:

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LTV = ($30 × 0.6) ÷ 0.05 = $360

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Still with us? Let’s take this one step further…

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Consider Discounts, Returns, and Net Profit

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If you want to really get into the weeds (which we recommend if you’re making serious budgeting decisions), you should also subtract:

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• Returns/refunds
  
  
• Fulfillment & shipping costs
  
  
• Customer service overhead
  
  
• Discounts (promotions, coupons, etc.)
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Conjura helps you track contribution margin per customer. This gives you the net value of each customer after all direct costs. Why is this important?

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Because revenue is vanity. Profit is sanity.

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How to Calculate CAC and Link It to LTV

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You can’t talk about LTV without talking about CAC - Customer Acquisition Cost.

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CAC is the average cost of acquiring a new customer. It includes ad spend, agency fees, influencer costs, and even overhead like your marketing team’s salaries (if you want to get super accurate).

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CAC = Total acquisition spend ÷ Number of new customers acquired

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Example:

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Let’s say you spent $10,000 on paid ads in September and acquired 250 new customers.

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Your CAC = $10,000 ÷ 250 = $40

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This is a vital number because it shows how efficient (or expensive) your growth engine is. But here’s the kicker, CAC means nothing in isolation. It only matters in relation to LTV.

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Understanding the LTV:CAC Ratio

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This is the holy grail for eCommerce profitability.

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LTV:CAC Ratio = LTV ÷ CAC

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This tells you how much value you're getting in return for your customer acquisition investment.

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Example:

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If your LTV is $360 and your CAC is $90:

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LTV:CAC = 360 ÷ 90 = 4:1

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That means for every dollar you spend acquiring a customer, you’re getting $4 in return over their lifetime. ✅ Great.

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But if your CAC crept up to $180 and LTV stayed the same? That drops your ratio to 2:1. ⚠️ Not so great.

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General benchmarks:

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• 3:1 = Healthy
  
  
• 1:1 = Breaking even (not ideal)
  
  
• 5:1 = Excellent (but might mean you're under-investing in growth)
  
  

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You can’t manage what you can’t measure and if you’re not tracking LTV:CAC by channel, product, and customer cohort, you're making inaccurate decisions.

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How Conjura Helps eCommerce Brands Master LTV, CAC & LTV:CAC

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Crunching these numbers manually (or in messy spreadsheets and disjointed systems) gets old, fast. That’s where Conjura steps in. Conjura is built from the ground up for eCommerce brands who want to move beyond reporting and into profit-driving decision intelligence.

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Here’s how we help you nail LTV, CAC, and the all-important ratio between them:

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LTV Done Right

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• Automatic LTV calculation for every customer cohort
  
  
• Track gross revenue, gross profit, and contribution profit over time
  
  
• View LTV by acquisition channel, campaign, country, product, or even SKU
  
  
• See 12-month LTV, not just a static lifetime number
  
  
• Identify high-value customers and the products that acquired them
  
  

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Conjura calculates LTV by cohort, product, and acquisition source, so you know not just who your best customers are, but what brought them to your door in the first place.

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CAC with Context

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• Accurate CAC calculations, integrated with your ad platforms (Meta, Google, TikTok, etc.)
  
  
• Automatically match ad spend to customer acquisition using first-party data
  
  
• Calculate CAC by cohort, campaign, channel, or product landing page
  
  
• Detect rising CAC before it eats your margins
  
  

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No more guessing if your Facebook campaign is paying off. Conjura shows the exact CAC and LTV for each campaign, down to the product level.

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LTV:CAC Ratio

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• Monitor LTV:CAC trends across time so you can adjust spend fast
  
  
• Filter by campaign, platform, audience, and product
  
  
• Set benchmarks for healthy acquisition
  
  
• Build marketing plans based on actual profitability, not just ROAS

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Strategies to Boost LTV (and Lower CAC)

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Once you’ve crunched the numbers on your Customer Lifetime Value (LTV) and Customer Acquisition Cost (CAC), the next step is turning insights into action. The goal? Increase the long-term value of every customer you acquire and bring those customers in more efficiently.

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Let’s walk through the best strategies to increase LTV and lower CAC for eCommerce brands and why they work.

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📈 How to Increase LTV

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1. Raise Average Order Value (AOV)

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One of the fastest ways to increase LTV is to increase how much customers spend each time they shop. A higher AOV means each transaction delivers more revenue, without the need for additional acquisition.

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Here’s how:

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• Bundle products that are frequently bought together and offer a slight discount to increase perceived value.
  
  
• Upsell at checkout using “frequently bought with” widgets, priority shipping offers, or “complete the look” bundles.
  
  
• Offer free shipping thresholds slightly above your average order value to nudge larger carts (e.g., “Free shipping on orders over $75” when your AOV is $60).
  
  

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When AOV goes up, your CAC remains fixed, making every new customer more profitable from the first transaction.

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2. Boost Repeat Purchase Rate

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Many brands focus all their energy on the first sale, but it’s the second purchase that often signals a true, loyal customer.

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To increase repeat rate:

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• Launch post-purchase email flows with relevant product recommendations and reorder reminders.
  
  
• Offer loyalty programs that reward customers for repeat purchases with points, perks, or exclusive access.
  
  
• Create product subscriptions for consumables (e.g., skincare, pet food, supplements), offering convenience and savings to customers while locking in recurring revenue for your brand.
  
  

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Every additional purchase increases a customer’s LTV, and since you’re not paying to reacquire them, the profit margin improves dramatically.

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3. Extend Customer Lifespan

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Your best customers are the ones who keep coming back year after year. But they won’t do that by accident, you need to earn that long-term loyalty.

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Here’s how to keep customers around:

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• Deliver exceptional customer service. Fast, helpful responses to inquiries, hassle-free returns, and proactive issue resolution build trust and reduce churn.
  
  
• Invest in your brand community. Engage customers through social media, user-generated content, loyalty programs, and product education. When customers feel like they’re part of something bigger, they stick around.
  
  
• Use targeted retention marketing. Build segmented email flows based on purchase behavior to keep your brand top-of-mind with relevant messaging.
  
  

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Customers who stay with your brand longer generate exponentially more value and they're often more willing to try new products, pay full price, and recommend you to others.

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4. Target High-LTV Segments

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Not all customers are created equal. Some buyers will spend $50 once and disappear, while others will spend $500 over the course of two years. If you know who your high-LTV customers are, you can go find more of them.

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Tactics to tap into better audiences:

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• Analyze your data (especially with a tool like Conjura!) to identify characteristics of your highest-value cohorts - channels, geos, products, etc.
  
  
• Build lookalike audiences based on your best customers for paid campaigns.
  
  
• Personalize acquisition and retention efforts - tailor your landing pages, email sequences, and offers to resonate with these high-LTV personas.
  
  

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Investing more in these high-LTV segments often means you can afford to spend more on acquisition (because you’ll earn it back, and then some).

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💡 How to Lower CAC

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1. Optimize Paid Media Spend

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One of the biggest contributors to bloated CAC is inefficient ad spend - running underperforming ads for too long, or targeting the wrong audience with the wrong message.

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How to optimize:

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• Cut what’s not working. Review campaigns by ROAS, LTV:CAC ratio, and contribution margin. If it's not profitable, turn it off.
  
  
• Double down on winners. Shift more spend toward campaigns and channels that are delivering high-LTV customers.
  
  
• Test smarter. Iterate ad creatives, landing pages, and offers regularly to improve clickthrough and conversion rates - small gains here can reduce CAC significantly.
  
  

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With Conjura, you can track ad spend down to the SKU level and match it directly to customer behavior, so you know exactly where your money is working.

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2. Use High-Performing Products for Acquisition

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Certain products act as powerful acquisition tools. They attract attention, convert well, and lead to high-LTV outcomes, even if they’re not your most expensive items.

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Why it works:

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• These products often appeal to first-time buyers because they solve a clear problem or offer great value.
  
  
• Once acquired, those customers often go on to explore your catalog, increasing their overall lifetime value.
  
  

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To put this into action:

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• Drive traffic to landing pages featuring these “hero” SKUs.
  
  
• Promote bundles or trial versions of your flagship products.
  
  
• Use Conjura’s landing-page and cross-product metrics to discover which products generate the best downstream revenue.
  
  

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3. Improve Your Site’s Conversion Rate (CRO)

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If you're paying to drive traffic to your site but not converting those visitors into customers, your CAC will suffer, even if your ads are great.

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Ways to improve CRO:

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• Speed up your site, especially on mobile. Page load time directly affects bounce and conversion rates.
  
  
• Simplify checkout. Fewer steps = fewer drop-offs.
  
  
• A/B test offers and UX. Try variations of homepage banners, product page layouts, or discount thresholds to see what drives more conversions.
  
  
• Use social proof. Reviews, testimonials, and UGC boost trust and reduce hesitation at the point of purchase.
  
  

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Even a 1% lift in conversion can mean thousands saved on acquisition, and better ROI across your campaigns.

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4. Leverage Organic Channels

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Not every customer needs to come from paid ads. Building strong organic acquisition engines helps reduce blended CAC and drives long-term, compounding growth.

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Focus on:

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• Email marketing: Build a pre-purchase welcome flow, abandoned cart reminders, and post-purchase campaigns to stay top-of-mind without extra spend.
  
  
• Search engine optimization (SEO): Optimize product pages, publish content around keywords your audience searches for (e.g., buying guides, comparison posts).
  
  
• Influencer and ambassador programs: Work with creators who genuinely love your product and have trust with your audience.
  
  
• Referral programs: Turn happy customers into your acquisition channel by incentivizing referrals with discounts or store credit.
  
  

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Organic channels may take longer to build, but they lower your CAC over time, improve margins, and bring in more loyal, higher-LTV customers.

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Build for Lifetime Value with Conjura

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Understanding how to calculate customer LTV, how to match it with CAC, and how to interpret the LTV:CAC ratio isn’t just an academic exercise, it’s how winning eCommerce brands build sustainable, profitable growth.

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If you’re ready to:

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• Eliminate the guesswork from your strategic decision making
  
  
• Truly understand your best customers and where they come from
  
  
• Get clear, visual insights into your LTV, CAC, and LTV:CAC by channel, campaign, and product
  
  

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Then Conjura is your next power move.

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Book your demo of Conjura here and level-up your LTV and CAC game!

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