💼 LTV (Customer Lifetime Value)

LTV (Customer Lifetime Value)#

The total value a customer is expected to generate over time.

Important

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What it is#

Customer lifetime value (LTV) is the total revenue — or, more precisely, profit — an average customer generates over their entire relationship with the business, from first purchase to churn. It answers how much is a customer actually worth?

How it’s estimated#

A common form multiplies average revenue per account by gross margin and divides by the churn rate (equivalently, revenue per period times expected lifetime). So LTV rises with higher retention, fatter margins, and more revenue per customer — retention being the biggest lever.

Why it matters#

LTV is the value half of unit economics. It sets the ceiling on what you can afford to spend acquiring customers, justifies investment in retention and upsell, and — paired with acquisition cost — tells investors whether the business is sustainable. A small lift in retention can swing LTV dramatically.

Theme: Business & Growth Analytics · All terminology

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Mind map — connected ideas

CAC (Customer Acquisition Cost) · Incremental Sales · Conversion Rate (CR) · Blended CAC (Customer Acquisition Cost) · Paid CAC (Customer Acquisition Cost) · Incremental Conversions

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More in Business & Growth Analytics

Blended CAC (Customer Acquisition Cost) · CAC (Customer Acquisition Cost) · Cannibalization · Channel-Specific CAC (Customer Acquisition Cost) · Churn · Cohort · Cohort-Based LTV (Simple Version) · Conversion Rate (CR) · Cost-Per-Click (CPC) Models · Cross-Selling · CTR (Click-Through Rate) · Customer Lifetime · Customer Segmentation · D2C (Direct-to-Consumer)