To calculate customer lifetime value, multiply average order value by purchase frequency (orders per customer per year) by customer lifespan in years. Then multiply by your gross margin to get the profit a customer is worth. Repeat purchase rate is the share of customers who ordered more than once in the period: repeat customers divided by total customers.
This guide is written by TheCoins, which sells loyalty and commerce software. The formulas below work with any system, including a spreadsheet. Every number in the examples is an example: replace it with your own figures and your own currency.
The five numbers you need
Customer lifetime value (CLV) is the money a customer brings you over the whole time they keep buying from you. It is built from a few simple numbers that most restaurants, cafés and shops already have in their sales data.
- Average order value (AOV): revenue divided by number of orders.
- Purchase frequency: orders divided by unique customers, for one period (usually a year).
- Repeat purchase rate: customers who ordered two or more times, divided by all customers in the period.
- Retention rate: the share of customers from one period who buy again in the next. Churn rate is the rest, so retention plus churn equals 100%.
- Customer lifespan: how many years a typical customer keeps buying. A simple estimate is 1 divided by the yearly churn rate.
Use the same period for every number. If AOV comes from 12 months, frequency and churn must come from the same 12 months.
Repeat purchase rate formula and purchase frequency
Repeat purchase rate = customers with 2 or more orders / total customers × 100. Purchase frequency = total orders / total customers. Both need orders linked to a customer, usually by phone number, account or loyalty card. Anonymous cash orders cannot be counted.
| Example café, one year | Value | Working |
|---|---|---|
| Revenue from identified customers | $120,000 | From sales data |
| Orders from identified customers | 8,000 | From sales data |
| Unique customers | 2,500 | Counted by phone number |
| Customers with 2 or more orders | 900 | From sales data |
| Average order value | $15 | 120,000 / 8,000 = 15 |
| Purchase frequency | 3.2 orders a year | 8,000 / 2,500 = 3.2 |
| Repeat purchase rate | 36% | 900 / 2,500 = 0.36 |
Read these two numbers together. A 36% repeat rate with a frequency of 3.2 means a minority of regulars place most of the orders, while most customers came once. That one-time group is where a loyalty program or a follow-up message has the most room to work.
How to calculate customer lifetime value
Simple CLV = average order value × purchase frequency × customer lifespan. This gives revenue per customer. Margin-based CLV multiplies the result by your gross margin, so it shows profit, which is what you actually spend from. The table compares the example café with an example clothing store.
| Step | Example café | Example store |
|---|---|---|
| Average order value | $15 | $40 |
| Purchase frequency per year | 3.2 | 2.0 |
| Yearly churn rate | 40% | 33% |
| Customer lifespan | 1 / 0.40 = 2.5 years | 1 / 0.33 = about 3 years |
| Simple CLV (revenue) | 15 × 3.2 × 2.5 = $120 | 40 × 2.0 × 3 = $240 |
| Gross margin | 65% | 40% |
| Margin-based CLV (profit) | 120 × 0.65 = $78 | 240 × 0.40 = $96 |
The store has double the revenue CLV of the café, but only $18 more profit per customer once margin is applied. That is why margin-based CLV is the number to use for budgets.
Churn and retention rate
Retention rate = customers from period 1 who bought again in period 2 / customers in period 1 × 100. Churn rate = 100% minus retention rate. Count only customers who existed at the start; new customers who joined in period 2 do not belong in this calculation.
| Example café | Value | Working |
|---|---|---|
| Customers who ordered in 2025 | 1,000 | From sales data |
| Of those, ordered again in 2026 | 600 | From sales data |
| Retention rate | 60% | 600 / 1,000 = 0.60 |
| Churn rate | 40% | 100% - 60% = 40% |
| Expected lifespan | 2.5 years | 1 / 0.40 = 2.5 |
Small changes in churn move lifespan a lot. At 30% churn the same café would keep a customer for about 3.3 years instead of 2.5, which raises CLV by about a third with no change in prices.
How loyalty changes customer lifetime value
A loyalty program mostly works on frequency and lifespan. In this example the café gets regulars to visit 4 times a year instead of 3.2 and spends 3% of revenue on rewards. Lifespan is kept at 2.5 years to stay conservative, even though better retention would usually extend it.
| Example café | Before loyalty | With loyalty |
|---|---|---|
| Purchase frequency | 3.2 | 4.0 |
| Simple CLV | 15 × 3.2 × 2.5 = $120 | 15 × 4.0 × 2.5 = $150 |
| Margin after reward cost | 65% | 65% - 3% = 62% |
| Margin-based CLV | 120 × 0.65 = $78 | 150 × 0.62 = $93 |
| Gain per customer | 93 - 78 = $15 | |
| Gain across 2,500 customers | 15 × 2,500 = $37,500 |
The test for any loyalty program is this comparison: the extra margin from more visits must be larger than the cost of the rewards and the software. If your numbers do not show that, change the reward rules before you scale the program.
Practical ways to raise repeat visits
How much you can spend to acquire or win back a customer
Margin-based CLV is the ceiling on what a new customer is worth, so it is also the upper limit on what you should spend to get one. Customer acquisition cost (CAC) is everything you spend to win new customers in a period, such as ads, first-order discounts and influencer fees, divided by the new customers you gained. A common guideline is to keep CAC well below CLV, because rent, salaries and other fixed costs also have to come out of that margin.
Win-back follows the same logic. Example: the café sends a win-back offer to 400 customers who have not ordered in 90 days. Messages cost $0.05 each and the offer is a $4 discount. If 10% return, that is 40 customers. Cost: 400 × 0.05 + 40 × 4 = $20 + $160 = $180. If each returning customer buys for one more year, they are worth 15 × 3.2 × 0.65 = $31.20 each, so 40 × 31.20 = $1,248 in gross profit. Your return rate will differ, so test on a small group first.
Where to get the data
- Point of sale (POS): order totals and dates. Ask cashiers to record a phone number so orders link to a person.
- Online orders: your website, app, ordering links and delivery orders, each with a customer account.
- Loyalty program: the most reliable customer ID, because customers identify themselves to earn rewards.
- Accounting: gross margin by category, so margin-based CLV uses real costs, not a guess.
TheCoins includes analytics on top of its online store, ordering links and QR, branded app, kiosks and coins loyalty, across multiple branches, so orders from these channels and the loyalty program sit against the same customer. It connects to Oracle MICROS and other POS systems via API, which lets in-store orders join the same history. See the analytics page for the reports available on your plan.
In TheCoins, the Customers reports show lifetime value, retention, RFM segments and cohorts across every channel and branch, so you can read these numbers without exporting data to a spreadsheet.
Common mistakes
- Using revenue CLV to set ad budgets. Use margin-based CLV.
- Mixing periods, such as AOV from one month and frequency from a year.
- Counting anonymous orders as one customer each, which lowers frequency and repeat rate.
- Counting new customers in the retention calculation.
- Averaging everyone together. Calculate CLV separately for regulars, occasional and one-time customers, and by branch.
- Ignoring reward and discount costs when you measure a loyalty program.
Sources
What is an all-in-one ecommerce platform?
Delivery app commission: what you really pay
How to start an online store in Egypt
How to increase customer loyalty
The best loyalty program apps for businesses in Egypt in 2026
The best loyalty program apps for businesses in Saudi Arabia in 2026
How to set up a restaurant loyalty program that pays for itself
Loyalty programs and online stores for businesses in Morocco
Starting an online store in Saudi Arabia in 2026: a step-by-step guide
The best loyalty program apps for UAE restaurants, cafés and shops in 2026
How restaurants and cafés can market on WhatsApp in 2026
Café loyalty program ideas that bring regulars back
How to design a retail loyalty program that grows basket size in supermarkets and stores
Receipt loyalty apps: how customers earn points by scanning receipts
