How to Calculate Amazon Customer Lifetime Value
How to work out what an Amazon customer is really worth, with a worked example, and turn it into the ACoS you can actually afford.
Customer lifetime value (LTV) is the total a customer spends with you over their whole relationship with your brand, not just on their first order. For any Amazon brand whose customers reorder, it's the number that should set your ad budget.
Most sellers never work it out. They judge every campaign on the first sale, set an ACoS target from their first-order margin, and cut anything that looks too expensive. For a supplement, a skincare product or anything else people buy again, that means turning away customers who would have been profitable.
This guide shows you how to calculate Amazon customer lifetime value with numbers you can find today, how to turn it into an ACoS you can actually afford, and the mistakes that throw the answer off.
The simple formula
For one product, customer lifetime value comes down to three things: how much a customer spends per order, how many orders they place, and how much of that you keep.
Lifetime revenue per customer = average order value × average orders per customer
Lifetime profit per customer = lifetime revenue × profit margin before ads
Profit margin before ads is what's left from each sale after product cost, Amazon fees and VAT, but before advertising. Use this rather than revenue, because revenue alone will make every customer look more valuable than they are.
The tricky part is average orders per customer. Most customers only buy once, so you need to split them into two groups:
Average orders per customer = 1 + (repeat rate × extra orders per repeat buyer)
- Repeat rate is the share of customers who buy a second time.
- Extra orders per repeat buyer is how many more times they buy after the first order, over the period you're measuring.
A worked example
Take a daily supplement with a 30-day pack:
| Input | Figure |
|---|---|
| Average order value | £24 |
| Profit margin before ads | 38% (£9.12 per order) |
| Customers who buy again | 42% |
| Days between orders for repeat buyers | 55 |
| How long repeat buyers keep buying | 14 months |
A repeat buyer reorders every 55 days for about 14 months, which is seven more orders after the first. So:
- Average orders per customer = 1 + (0.42 × 7) = 3.9
- Lifetime revenue = £24 × 3.9 = £95
- Lifetime profit before ads = £95 × 38% = £36
Judged on the first order alone, this customer is worth £9.12. Over their lifetime, they're worth nearly four times that.
What to do with the number
Lifetime value only matters once you compare it with what you pay to win a customer.
1. Work out your cost per new customer
Divide your ad spend by the number of new-to-brand customers it brought in, not by all your ad orders. Many ad orders go to people who already buy from you. In the AMC analyses I've run, cost per order and cost per new customer differed by 2 to 3 times on the same product.
2. Check your LTV:CAC ratio
Divide lifetime profit by cost per new customer. In the example, if it costs £22 to win a new customer, the ratio is £36 ÷ £22 = 1.6×.
| LTV:CAC (on lifetime profit) | What it means |
|---|---|
| Below 1× | You lose money on every customer you acquire, however long they stay |
| 1× to 3× | Profitable, but thin. Little room for mistakes or rising ad costs |
| 3× or more | Healthy. You can afford to grow acquisition |
3. Find your payback month
Add up the profit a new customer generates month by month, and see when it passes what you paid to acquire them. In the example, the £22 is covered in month 8, after the fourth order. Across the Seller Central consumables I've analysed, paying back on the second order within 2 to 4 months was the norm.
4. Work out your lifetime break-even ACoS
Your first-order break-even ACoS is simply your margin: 38% in the example. Anything above that looks like a loss.
Your lifetime break-even ACoS is lifetime profit ÷ first order value: £36 ÷ £24 = 150%. That's the ACoS at which a new customer still pays for themselves over time.
That doesn't mean you should run every campaign at 150% ACoS. It only applies to spend that wins genuinely new customers, not branded search or sales to existing buyers. But it shows why a flat ACoS target can cut profitable acquisition campaigns.
Lifetime value depends on the shape of your product
The same formula gives very different answers depending on how a product is used. Across the consumable brands I've analysed, the product's shape predicted lifetime value better than its category:
| Product shape | Typical revenue per customer | Share earned in year 1 |
|---|---|---|
| Occasion or life-stage product | £7–£25 | 88–95% |
| Course-based supplement (3–6 months) | £50–£60 | ~80% |
| Daily personal-care consumable | £50–£60 | ~60%, still rising |
| Daily children's supplement | £95–£110 | ~60%, still rising |
Two lessons come from this:
- If most of the value arrives in year 1, a 12-month lifetime value is good enough. You don't need to wait years for the data.
- If value keeps rising after year 1, a 12-month figure understates what customers are worth. Measure over 24 or 36 months.
Where to find your inputs
- Average order value: your Business Reports in Seller Central (sales ÷ orders), or your own sales data.
- Profit margin before ads: your own product costs, Amazon's fee preview for the listing, and VAT.
- Repeat rate: the Repeat Purchase Behavior report in Brand Analytics gives a good starting point.
- Days between orders: if you don't have the data, start from how long the pack lasts and add some slack. People reorder late. On a 30-day pack, non-subscribers came back roughly every 66 days and subscribers about every 41.
- Cost per new customer: the new-to-brand columns in your campaign reports.
- The accurate version of all of the above: Amazon Marketing Cloud, which measures real customers over time instead of estimates.
Mistakes that throw the answer off
- Using revenue instead of profit. A £95 customer isn't worth £95 to your ad budget. Use profit before ads.
- Using cost per order instead of cost per new customer. It makes acquisition look cheaper than it is.
- Reading a price drop as a change in loyalty. On one product, lifetime value fell about 40% across customer groups, but units per customer barely moved. The cause was deeper discounting.
- Counting relisted products as new customers. When a listing is replaced, customers of the old listing can show up as new buyers of the new one, inflating early lifetime value.
- Using retail prices for Vendor Central. If you sell to Amazon as a vendor, lifetime value should use your wholesale price and margin, not the price shoppers paid Amazon.
The bottom line
Your first order tells you whether a sale was profitable. Lifetime value tells you whether a customer was. For repeat-purchase brands, that difference decides how much you can spend on ads, which campaigns to keep, and how fast you can grow.
Use the free Amazon LTV calculator to run these numbers for your own products. It shows your lifetime value, payback month and lifetime break-even ACoS in about two minutes.
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