LTV (Customer Lifetime Value): Customer Lifetime Value
Customer Lifetime Value (CLV), also known as LTV, is the total amount of money a customer is expected to spend with your business during their lifetime.
Understanding LTV is the only way to know if your CAC is sustainable. If your LTV is high, you can afford to spend more to beat your competitors in the acquisition stage.
Calculation: Average Purchase Value * Average Frequency * Average Customer Lifespan = LTV
Example: €40 average order, 2 orders per month, 12 months average lifespan equals €960 revenue LTV.
For profit-based LTV, multiply by gross margin. At 50% margin, €960 revenue LTV becomes €480 gross margin LTV.
Frequently Asked Questions
By focusing on customer retention through Email Marketing, loyalty programs, and high-quality customer support to reduce "Churn."
A standard benchmark for a healthy business is 3:1. This means the customer’s value is three times higher than the cost it took to acquire them.
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