How to Calculate Average Customer Lifespan (using Shopify)
This article is an add-on to a previous blog post How to Calculate Customer Lifetime Value (using Shopify)
Average Customer Lifespan influences your Customer Lifetime Value, which tells you how much revenue you should expect from each customer. This number is important as you consider the costs associated with acquiring new customers, and whether you should invest more or less to find new customers.
Step 1: Create a Custom Report in Shopify
- In your Shopify Portal, navigate to Analytics > Reports > Custom Reports > View All Custom Reports
- Select “Create Custom Report”
We will be adding the columns we need in order to complete the calculation. To add a column:
- Adjust your timeframe to the time you began selling on Shopify by clicking on “Date range” (If you are doing analysis over a shorter timeframe, adopt that range).
- Select “Edit Columns”
- Add “Customer Name”, “Customer Email”, “First Order Day”, “Last Order Day”, and “Orders to Date”
- Export your report to CSV and save to your desktop
Step 2: Calculate the Sum of Lifespans for your Customers
We’ll be completing the remainder of the calculation in a spreadsheet. Open your exported CSV in Excel or Google Sheets.
- Create a calculation to subtract Last Order Day by First Order Day. This number is reported in number of days.
- Sum your Customer Lifespan column
Step 3: Calculate the Total Number of Customers
- Use the built-in “Count” function to calculate the total number of customers
Step 4: Calculate Average Customer Lifespan
- Divide Sum of Customer Lifespan by Total Number of Customers
That’s it! For our scenario above, the Average Customer Lifespan for this company is 843.33 days*.
*When using this value in your Customer Lifetime Calculation, remember to convert it back to years by dividing by 365
Conclusion: How do I use it?
Average Customer Lifespan tells you how long your typical customer remains a customer. This computation is part of the larger Customer Lifetime Value (CLV) calculation which is used to determine the overall revenue expected from each additional customer you acquire for your business.
As you contemplate your allocation of resources, it is important to monitor your CLV and Customer Acquisition Cost (CAC) to ensure that you are receiving a positive return on marketing/advertising spend.
Josh Wilson is the Founder and CEO of Luz. Luz is a technology-first approach to automate, aggregate, and analyze eCommerce data.