LTV Cohorts Overview

The StoreHero LTV Cohorts page offers a powerful way to analyse customer behaviour over time, focusing on the value they bring to your business based on when they made their first purchase.

Cohort Analysis

Group Customers by Purchase Date

The LTV Cohorts page allows you to group customers based on the date or month of their first purchase. This grouping helps you track how these customers' behaviour and value to your business change over time.

Metrics Tracked

You can view the data by either gross profit accumulated per customer or net sales accumulated per customer, with the ability to split this data by month, week, quarter, or year.
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Example Analysis

12-Month View

For example, if analysing the last 12 months, you might choose to look at gross profit per customer, split by month. In July 2023, for instance, a demo store acquired 725 new customers with an average customer acquisition cost (CAC) of €19. The repeat purchase rate was 19%, meaning a portion of these customers made additional purchases.

Profit Growth Over Time

The analysis might show that the gross profit from these customers was €26 initially. Over the following months, this profit increased, reaching €32 by month 10. This incremental growth is crucial for understanding the long-term value of your customers.
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CAC Payback Analysis

Profitability Tracking

The CAC payback toggle helps you identify when your customer acquisition efforts become profitable. For example, if customers are acquired for €19 and generate €26 in gross profit from their first order, this indicates first-order profitability.

Jagged Profit Lines

If your profit lines are less smooth and more jagged, it may indicate inconsistent profitability from first orders. Understanding when profitability occurs—whether after the first, second, or subsequent orders—is essential for managing cash flow and overall business health.
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Long-Term Profitability Insights

Understanding Time to Profitability

For businesses willing to spend more on acquiring new customers than they generate in profit from the first order, this tool helps gauge the time it takes to reach profitability. For example, if you are profitable only after the second order, but that second order takes six or seven months to occur, you might be operating at a loss for that period, affecting cash flow.

Repeat Purchase Analysis

The LTV Cohorts page also helps you understand how effectively you are generating additional incremental and profitable sales from existing customers. Tracking these metrics can inform your retention strategies and long-term customer value optimisation.

Recommended Growth Targets

Profit Growth within 60 Days

StoreHero generally recommends aiming for a 30% increase in profit-based LTV within the first 60 days after the initial purchase. For example, if a customer generates €26 in profit initially, you should aim to increase that to around €33.80 by the end of the second month.

Doubling Gross Profit by Month 12

A long-term goal could be to double the gross profit from the first order by the end of 12 months. For instance, increasing from €26 to €52 would indicate a strong and sustainable profit margin, reducing reliance on constantly acquiring new customers.

How to Use the LTV Cohorts Page

Set Up Cohort Analysis

Start by grouping your customers based on when they made their first purchase. Choose the metrics (gross profit or net sales) and the time intervals (monthly, weekly, etc.) that are most relevant to your analysis.

Monitor Profit Growth

Track how the profit from these customer groups evolves over time. Use the CAC payback analysis to identify when your acquisition costs are recovered and profitability begins.

Analyse Time to Profitability

Understand the time it takes for customers to become profitable, especially if initial acquisition costs exceed the profit from the first order. This insight is crucial for managing cash flow and planning your customer acquisition strategy.

Set and Track Growth Targets

Use the recommended growth targets as benchmarks for your business. Aim for a 30% increase in LTV within 60 days and work towards doubling gross profit by month 12.

Optimize Retention Strategies

Use the insights from the LTV Cohorts page to refine your retention strategies, focusing on generating repeat purchases and increasing the lifetime value of your customers.
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The StoreHero LTV Cohorts page is an invaluable tool for understanding and optimising customer lifetime value. By tracking how customer value evolves over time and setting clear profitability goals, you can make data-driven decisions that enhance your business’s long-term profitability. If you have any questions or need further assistance, our support team is here to help.