Customer Loyalty

Customer Lifetime Value by Product: Why Some Items Drive Repeat Purchases

A jewelry maker sold 200 pairs of earrings last year (gross: $8,000). She also sold 50 journals (gross: $3,000). By absolute revenue, earrings won. But when she analyzed repeat purchases, she discovered: 14 customers who bought earrings bought again (7% repeat rate). 8 customers who bought journals came back—and bought 2-3 additional times (16% repeat rate). The journal buyers had 2.3× higher lifetime value. This article teaches you to find your hidden loyalty drivers.

What Is Customer Lifetime Value (CLV)?

CLV = Total profit from a customer across all purchases they make from you (past and future).

Simple formula: CLV = (Average Purchase Value) × (Repeat Purchase Rate) × (Customer Lifespan in Years)

When you analyze CLV by product, you're asking: "Which products do customers return to buy again? And why?"

Why CLV by Product Matters for Your Business

1. One-Time Sales Are Expensive to Acquire

You spend on photos, marketing, customer service. If a customer buys once and never returns, your profit is eaten by acquisition costs. Repeat purchases amortize those costs across multiple sales.

2. Repeat Customers Are Easier to Sell To

A customer who bought once knows your quality and trusts you. They're 50%+ cheaper to convert on a second purchase than a cold customer. They're also easier to sell new products to.

3. Products With High CLV Are Worth More Effort

If a product generates $50 CLV but another generates $150 CLV, the latter is worth 3× the marketing investment. Knowing this helps you optimize your product mix strategically.

How to Calculate CLV by Product (Step-by-Step)

Step 1: Calculate Average Profit Per Sale

This is your standard profit per unit calculation.

Example: Handmade scarves have $12 profit per sale

Step 2: Identify Repeat Customers

Track which customers bought your product more than once. This requires order-level data.

Example: 200 scarves sold to 180 unique customers. 20 customers bought scarves 2+ times.

Step 3: Calculate Repeat Purchase Rate

(# of repeat customers ÷ # of total customers) × 100 = repeat rate

Example: (20 repeat customers ÷ 180 total) × 100 = 11% repeat rate

Step 4: Estimate Repeat Purchases Per Repeat Customer

Of those 20 repeat customers, how many times did they buy on average? If 10 bought twice, 8 bought three times, and 2 bought four times: (20 + 24 + 8) ÷ 20 = 2.6 purchases on average.

Step 5: Calculate CLV

Average Profit × (1 + [Repeat Rate × Avg Repeat Purchases])

Scarves CLV: $12 × (1 + [0.11 × 1.6]) = $12 × 1.176 = $14.11 per customer acquired
(The "1" represents their first purchase; the 0.11 × 1.6 = 0.176 represents expected future repeat profit)

Real Example: Three Products, Three Different CLV Patterns

A handmade goods store tracks CLV for three popular products:

Product A: "Signature" Candles (HIGH CLV)

Annual units sold	150
Unique customers	120
Repeat customers	32 (27% repeat rate)
Profit per sale	$18
Avg repeat purchases	1.8×
CLV per customer	$26.31

Story: Customers love the signature scent. They repurchase consistently. High emotional attachment.

Product B: Seasonal Gift Sets (MEDIUM CLV)

Annual units sold	200
Unique customers	190
Repeat customers	12 (6% repeat rate)
Profit per sale	$22
Avg repeat purchases	1.4×
CLV per customer	$23.85

Story: High absolute revenue but most buyers are one-time holiday gift-givers. Lower repeat rate.

Product C: Trendy Accessories (LOW CLV)

Annual units sold	180
Unique customers	175
Repeat customers	3 (2% repeat rate)
Profit per sale	$14
Avg repeat purchases	1.3×
CLV per customer	$14.37

Story: Trendy, but customers buy once as a fad. Almost no repeat business. Low CLV despite decent sales volume.

The insight: Signature Candles have 1.8× the CLV of Trendy Accessories, even though both have similar sales volume. But Signature Candles get 10× more repeat purchases.

Strategic action: This maker should invest marketing dollars and production time into Signature Candles. Lower her trendy accessory line if it's competing for resources.

What Drives High Customer Lifetime Value?

Consistency & Quality

Customers repeat-buy products that never disappoint. If your candles smell amazing every time, they'll buy again. If quality varies, they won't.

Emotional Connection

Products with emotional significance ("my favorite scent," "makes me feel beautiful") have higher CLV. Functional products ("trendy bracelet") have lower CLV.

Consumability or Wearability

Consumable products (candles, skincare, foods) naturally have higher repeat rates. Someone uses a candle, it burns out, they buy again. A hand-painted decoration they hang once might never be repurchased.

Customer Service Excellence

Great unboxing experience, personal notes, easy returns policy—these drive repeat purchases. A bad experience (damaged item, rude response) kills CLV permanently.

Using CLV to Make Business Decisions

Decision 1: Where to Invest Marketing

Focus marketing on high-CLV products. A customer acquired for $50 marketing cost who has $50 CLV breaks even. But one with $150 CLV is a 3× multiplier.

Example: Spend on Signature Candle ads. Be cautious with Trendy Accessory ads (low CLV = hard to reach profitability).

Decision 2: Which Products to Scale

Scale products with high CLV first. The economics work better—repeat customers reduce acquisition cost burden.

Decision 3: Which Products to Discontinue

Low CLV + low volume = discontinue. Low CLV + high volume = investigate why. Can you improve quality to increase repeat rate?

Decision 4: Pricing Adjustments

High-CLV products can command premium pricing. Customers who return are less price-sensitive. Low-CLV products need competitive pricing to overcome acquisition costs.

Track Customer Lifetime Value by Product

TrueCraft tracks repeat purchase rates, calculates CLV, and shows which products create loyal customers. Make smarter investment decisions based on real data.

Start Free