{"id":21030,"date":"2019-07-05T10:03:36","date_gmt":"2019-07-05T10:03:36","guid":{"rendered":"https:\/\/www.proprofs.com\/c\/?p=21030"},"modified":"2025-10-17T09:57:23","modified_gmt":"2025-10-17T09:57:23","slug":"aov-vs-ltv-why-customer-lifetime-value-matters","status":"publish","type":"post","link":"https:\/\/dev.proprofsdesk.com\/blog\/aov-vs-ltv-why-customer-lifetime-value-matters\/","title":{"rendered":"AOV vs. LTV: Why Customer Lifetime Value Matters"},"content":{"rendered":"

Bundling? Free shipping? Suggested items? All of these eCommerce strategies work toward the same goal: getting customers to buy more on each visit, increasing the average order value.<\/p>\n

And they hold an important place in boosting revenue for your eCommerce brand. But what about increasing the lifetime value of your customers?<\/span><\/p>\n

Focusing on increasing order value is important to boosting revenue, but increasing the lifetime value of your customers is critical to long term success of your brand. <\/span><\/p>\n

\u201cMany entrepreneurs find themselves in a race to the bottom, as they begin to focus on using revenues to keep up with expenses instead of produce profits,\u201d writes <\/span>Eric Siu<\/span><\/a> at Entrepreneur. <\/span><\/p><\/blockquote>\n

eCommerce business owners and marketers would do well to remember that, especially at the beginning.<\/span><\/p>\n

Average Order Value (AOV)<\/b> is about real time sales tactics to increase sales volume, while<\/span> Customer Lifetime Value (CLV)<\/b> is about delivering individualized experiences over the long term to keep customers coming back.<\/span><\/p>\n

\"Why<\/p>\n

Let\u2019s jump into why that the lifetime value of your customers matters more than you might think \u2014 and how it can work hand-in-hand with AOV. <\/span><\/p>\n

<\/span>Average Order Value: A Short Term Fix for Revenue<\/strong><\/span><\/h2>\n

Average order value as a number is straightforward: the total revenue divided by the number of orders.<\/span><\/p>\n

AOV is a good metric to start with as you begin exploring new routes of acquisition and upselling. After all, the higher your order value the fewer customers you need to acquire.<\/span><\/p>\n

At the same time, in the short term, it gives you more to work with. Higher revenue means more advertising dollars.<\/span><\/p>\n

But focusing solely on AOV can be limiting. It not only fails to take into account the cost of goods and other expenses; AOV also limits its view to month by month improvements, rather than lending itself to long term growth. <\/span><\/p>\n

<\/span>Lifetime Customer Value: A Long Term Boost of Profitability <\/strong><\/span><\/h2>\n

In contrast to AOV, <\/span>increasing the lifetime value of a customer<\/span><\/a> takes a much larger and long term view of profitability.<\/span><\/p>\n

Customer lifetime value is defined as the metric that represents the total money a single customer spends on your business\/products during their lifetime. This can help you calculate and decide how much you want to invest in customer acquisition and customer retention.<\/span><\/p>\n

\"lifetime-customer-value_-a-long-term-boost-of-profitability\"<\/p>\n

Even with this limited definition, you can see that AOV and LTV are closely related; order value affects customer value, which affects lifetime value of the customer.<\/span><\/p>\n

The main difference in increasing LTV versus AOV is that lifetime value efforts are focused on organic changes to your interactions with customers. <\/span><\/p>\n

<\/span>AOV vs. LTV: Determining Which Matters Most for Your eCommerce Brand <\/strong><\/span><\/h2>\n

Average order value and long term customer value are not mutually exclusive metrics for growing your eCommerce business.<\/span><\/p>\n

Both AOV and LTV hold important insight into how effective your marketing and sales efforts are.<\/span><\/p>\n

It\u2019s not a matter of determining which matters <\/span>most <\/span><\/i>\u2014 it\u2019s about determining which approach is already working well and which needs work.<\/span><\/p>\n

If your current focus is solely on AOV, it\u2019s critical to <\/span>explore ways in which you can bring an LTV approach to your marketing and sales efforts<\/span>. In the same way, if you have that long term value but struggle with increasing order value, it\u2019s just as important to look at specific personalization and landing page tweaks that will increase sales.<\/span><\/p>\n

<\/span>4 Ways to Maximize LTV for Your eCommerce Brand <\/strong><\/span><\/h2>\n

If you have strategic efforts for increasing AOV in place, it\u2019s time to focus on more organic efforts for increasing LTV over time.<\/span><\/p>\n