Measuring “Repeats” right 🔁

A playbook for D2C growth marketers to find true

LTV of their customers

Get a free excel template to setup repeat & LTV measurement inside 📄
“LTV1/CAC = Return on Investment” for a DTC brand
How well can you answer the
question?
Great business
High repeats, Amazing
word of mouth,
> 1.5 superfans, successful
For each $ spent on

?
acquiring a customer,
LTV
how much $ do you
expect that they will = CAC At long term extinction
generate for the
risk
brand? <1 Not even able to
recover CAC in a year

LTV / CAC is a beautiful metric,

as it indicates quality of business irrespective of category
Low repeat like Mattresses hence have to recover CAC in the first
purchase, while high repeats ones can expect 2+ purchases to
1 LTV stands for Lifetime value cover it
High time the conversation shifts towards “LTV”
LTV
● Reflection of quality of brand i.e.
○ high repeats,
○ strong margins,
○ Successful upsell and
cross-sells
● In internal control by improving
quality and stickiness of both
“product” and its “positioning”
CAC
● At the mercy of
● On an increasing trend (CPMs on
Facebook have increased by 10x
in the last 10 years)
● Erratic with account blockages,
and seasonal spike in spending
from incumbents in IPL and
festive seasons
Have heard of & see CAC everyday, what’s LTV?
Lifetime Value

LTV = First order AOV

1 yr Essentially,
Lifetime value (LTV) boils
down to
Avg repeats in a yr
Total Gross margin
generated by a customer
their first year since making
the first purchase
Gross Margin1 (%)

While AOV & Margins are well understood, measuring repeats can be head-scratching
Not anymore

1 Gross margin is Net Revenue - COGS; Some companies use Contribution Margin 1
(Net Revenue - COGS - Shipping costs) instead; COGS is cost of goods sold
Most brands are measuring repeats “dangerously” wrong!
How do you respond if If you are pointing to this graph from “Shopify dashboard”, you’re
someone asks? selling yourself short?

?
The growth looks Repeat orders
great,
=
=+ Total orders 📈

How are repeats??

It is natural for a growing business to acquire customers much faster

than repeat customers showing up, rendering this metric ineffective

Eg: If orders scale 2x next month but repeats happen only after 3
months, the “Shopify” repeat rate will decrease.
Making cohorts our new best friend to find truth of our business
Repeat behavior of the May cohort over subsequent months

What is a cohort? M0 M1 M2 M3 M4
# customers Jun Jul Aug Sep
Simply put, cohort is a
subset of your customers 10 1 2 5 4
In this case, we are talking 100% 10% 20% 50% 40%
about monthly cohorts Revenue
i.e.
₹100 10 20 5 4
May cohort = customers 100% 10% 20% 5% 4%
who made their first
purchase in May
In May, In Aug,
We are trying to find out
their purchase behavior in 5 people from the may cohort seem to have
10 new customers were
the subsequent months come back and spent 40
acquired

And they spent a total of We call this

Rs 100 M3 customer retention: 50%
M3 revenue retention: 40%
What do cohorts look like for other months?
Revenue (₹₹)
Cohorts M0 M1 M2 M3 … M12
₹10 is spent by
customers
May ₹100 10 20 5 2 acquired in Jun
in 3rd month
from acquisition
100% 10% 20% 5% 2% (Sep)
i.e 6.7% of first
Jun ₹150 20 40 10 month (₹150)

100% 13.3% 26.7% 6.7%

Jul ₹120 20 20 Avg numbers

allow you to
understand
100% 16.7% 16.7% general behavior
(smoothening the
randomness)
Aug ₹130 40
100% 30.78%

Sep ₹170 M12 cumulative

retention tells you
Avg retention 100% 17.7% 21% 5.8% 2% how much more ₹
to expect from an
avg customer in 12
Cumulative months, as a % of
100% 117% 138% 143% 170%
retention first order
 Great cohorts look like …
Average Revenue retention Great cohort plateaus over time which indicates
% of M0
that “some of the customers have stuck around” i.e.
product and brand is sticky
100%
Bad cohort decline fast (~2-3 month mark) and
almost reach Zero repeat value i.e. no customers
are retained in the long run

M0 M1 M2 M3 … M12
Cohorts are an ingredient for LTV calculation

and compare against benchmarks to find right

LTV can be calculated using CAC for your context

Lifetime Value
Benchmarks

First order AOV ₹1000

LTV = 112% x $20 x 80% = $18 1 yr LTV / CAC
1 yr
Good 1.2
Cumulative 170%
M12 retention Great >1.5

Gross Margin 40%

(%) For a great LTV/CAC, we would have to be at CAC less
than ₹ 450

= ₹ 680 This approach can help in finding the ceiling on CAC that
you should keep in your marketing plans
There’s a lot to learn from your cohorts

Acquisition Impact of
friendly Habit forming discounting on
Product quality
products timeline LTV
Are your products
becoming a habit for Which products when How many purchases Do customers who
customers? acquired on became does it take to form a are acquired on sale
a gateway to selling habit? & discounts repeat
other products? lesser?
 How to even generate this?

Head over to this excel template for Shopify brands,

where you just need to add 2 reports from your
Analytics dashboard

And Voila,

Download Shopflo Cohort’s template

Not applicable for Basic Shopify plan

You get all of the above reports generated

automatically!
If you need any help analysing the data and setting this up

Reach out to us on Shopflo.com