LTV (Customer Lifetime Value)
Also known as: CLV, Customer Lifetime Value, Lifetime Value
LTV is the total revenue (or profit) a customer generates over the entire span of their relationship with your business.
What it actually means
Lifetime value estimates what a customer is worth across all their purchases, not just the first one. It is the single most important number for deciding how much you can afford to spend acquiring them. A business that only counts the first sale will always under-invest in advertising and lose to competitors who understand repeat purchases, referrals, and retention. LTV can be measured as revenue or, more usefully, as gross profit. Pairing it with CAC gives the LTV-to-CAC ratio that defines whether growth is profitable. Even a rough LTV beats no LTV — it reframes ad spend from a cost into an investment.
A gym member paying $50/month who stays 18 months has a $900 LTV.
A local salon customer who visits monthly for two years is worth far more than one haircut. Knowing that LTV lets you confidently outbid competitors for the first appointment.
Related terms
CAC is the total cost to acquire one new customer, including ad spend and all sales and marketing expenses, divided by customers won.
ROAS is the revenue generated for every dollar of ad spend, calculated as conversion revenue divided by ad spend.
CPA is the average cost to acquire one paying customer (or completed action), calculated as spend divided by conversions.
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