How Is Customer Lifetime Value Different From Average Order Value?

[Daniel]

I own an online business, and I get confused about how customer lifetime value is different from average order value. Both concepts are so similar.

Can someone help me understand them better?

 

[Emma]

Hi Daniel,

You are not alone. This is where many businesses get confused.

Average Order Value and Customer Lifetime Value are both revenue metrics, but they are operated on completely different levels of analysis.

Customer Lifetime Value, or popularly known as CLV, measures the total revenue a customer generates for your business over the entire period of their relationship with your brand.

Average Order Value (AOV), on the other hand, means the average amount a customer spends in a single transaction. In a nutshell, it’s a short-term transactional metric to help merchants understand how much revenue each order generates.

I hope this cleared things out for you!

[Author]

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