Customer Lifetime Value (LTV)
Also known as: LTV, CLV, Lifetime Value
LTV (Customer Lifetime Value) is the total profit a business can expect from a single customer across the entire relationship.
LTV reframes marketing from a cost into an investment. If you know a customer is worth ₹15,000 over their lifetime, you can confidently spend more to acquire them than a competitor who only looks at the first purchase.
The key inputs are average order value, purchase frequency, and customer lifespan (or churn rate for subscriptions). Improving retention raises LTV without any increase in acquisition spend.
LTV is most powerful as a ratio with CAC. An LTV:CAC of 3:1 signals healthy unit economics; a high ratio with slow growth can mean you're leaving demand on the table by under-spending on acquisition.
Formula
LTV ≈ Average order value × Purchase frequency × Customer lifespan × Gross margin
Example
₹2,000 average order × 4 orders/year × 3 years × 50% margin = ₹12,000 LTV.
Related terms
Customer Acquisition Cost (CAC)
CAC (Customer Acquisition Cost) is the total cost of sales and marketing required to win one new paying customer over a given period.
Return on Ad Spend (ROAS)
ROAS (Return on Ad Spend) is the revenue you earn for every rupee spent on advertising. A ROAS of 4 means ₹4 of revenue for every ₹1 of ad spend.
Conversion Rate
Conversion rate is the percentage of visitors who complete a desired action — a purchase, sign-up, or enquiry — out of everyone who had the chance to.
Marketing Funnel
A marketing funnel is the journey a person takes from first discovering your brand to becoming a customer, usually framed as awareness, consideration, and decision stages.
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