The Lifetime Value, Retention Rate, and RFM dashboard gives you an overview of key lifetime value and retention metrics. Getting insights into customer behavior both at an aggregate level, as well as having your customer base segmented out by potential determinants of customer loyalty and lifetime, allows you to focus your energies on nurturing relationships with customers that stand to provide the most value to your brand.
The LTV Dashboard has two sections:
- Lifetime Value and Repurchase Metrics
- RFM: Recency, Frequency, Monetary
Lifetime Value and Repurchase Metrics
Section A of this dashboard (below) provides a high-level view of your overall customer base. Section B show’s a customer’s lifetime value and repurchase rate by their “Time on Books” (TOB).
In the image above, the top four tiles show key statistics related to the size and health of your customer base. This includes total emails acquired, the number of customers who have ever purchased, customers who have purchased in the last 12 months, and the % of customers who purchased in the last 12 months.
Notes & Tips:
- The email count includes all emails captured by Shopify or other channels; Shopify considers an email a "customer", but we find this to be confusing if there has not been a purchase
- Total customers ever purchased/active customers includes only valid orders
Section B shows the average customer lifetime value (LTV) and repurchase rate by a customer’s “Time on Books” (TOB). The TOB metric represents how long an individual has been a customer. For example, on the day your customer made their first purchase, their TOB equals 0. The next 30 days following that, that customer’s TOB is equal to 1. TOB 2 represents the 60 days following their first purchase, and so on. This allows you to assess your entire customer base through the course of their customer journey, regardless of when they first became your customer.
In Section B we present your average customer LTV and repurchase rate by TOB. The LTV is a running total of your average Gross Margin per customer, which equals (Product sales revenue - Product costs) / Total Customers, by TOB. TOB 1 includes the Gross Margin for every customer who has reached TOB 1, regardless if they became a customer 1 month ago or 2 years ago.
Average Gross Margin per Customer is also calculated without TOB to the left of the running total graph. Below that is your Customer Repurchase Rate by TOB, which shows the proportion of your customer base that has made a second purchase by their TOB. Your average overall customer repurchase rate is also included to the left of the running total graph.
Notes & Tips:
- Repurchase rate only shows the likelihood of a customer’s second purchase, it doesn’t capture subsequent purchases after the second
- Only valid orders are counted toward a customer’s LTV and repurchase rate
- To see Lifetime Value or other metrics for a certain cohort by order date, simply change the Date Filter on the dashboard
Section C again shows LTV and repurchase rates, except this time pivoted out by the measured channel of acquisition, using your channel mapping logic. These results can give you an indication of which channels are driving the highest quality customers for your business.
Section D below is the “layer cake” graph of LTV by quarter of acquisition cohort. This graph places a customer into a cohort according to the quarter in which they made their first purchase, and then stacks those cohorts on top of each other using an area graph. Each cohort creates a "layer" of revenue, with the goal being to have a balance of revenue from new customers and those acquired in prior quarters/years.
RFM: Recency, Frequency, Monetary
Section E: Recency, Frequency, Monetary (RFM) is the traditional database marketing approach to customer segmentation and scoring. The upper visualization shows Average Gross Margin per Customer by RFM decile. The RFM decile places each customers into 1 of 10 segments based on their RFM score, which takes into account the recency, frequency, and amount of a customer’s lifetime purchase history. The three donut charts below that show the percentage of your customer base falling into each of your recency, frequency, and monetary segments.
Read more about RFM here.