Customer Lifetime Value (LTV)
Customer lifetime value (LTV) is the total profit a business expects from a customer across the full relationship, not just the first purchase.
Customer lifetime value (LTV or CLV) is the total profit a business expects to earn from a customer across the entire relationship, including repeat purchases, subscriptions, and referrals, not just the first transaction.
How it works
LTV is modeled from average order value, purchase frequency, gross margin, and retention over time, segmented by acquisition channel and customer cohort. The models range from simple historical averages to predictive cohort curves. LTV is the denominator that gives CAC meaning: a customer who costs 80 dollars to acquire is expensive at 100 dollars of lifetime profit and cheap at 600.
Why it matters
LTV determines how much a business can afford to pay for growth. Brands that understand LTV by segment can outbid competitors for the customers worth owning, and retention programs that lift LTV raise the ceiling on every acquisition channel at once. Learn more about our CRM and marketing automation services.
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