LTV (Customer Lifetime Value)
LTV is the total revenue or profit expected from a single customer across their entire relationship with your brand.
LTV answers the most important acquisition question: how much can I afford to pay for a new customer and still make money?
The simple formula multiplies average order value, purchase frequency and customer lifespan. For a more actionable number, multiply by gross margin to get profit LTV — that's your true ceiling for customer acquisition cost.
A widely cited benchmark is an LTV-to-CAC ratio of at least 3:1, meaning every dollar spent acquiring a customer returns three dollars in lifetime profit. Below 1:1 you're losing money; above 5:1 you may be under-investing in growth.
Formula
LTV = AOV × Purchase frequency × Customer lifespan Profit LTV = LTV × Gross margin %
Example
Related terms
AOV
AOV is the average dollar amount spent per order, calculated as total revenue divided by total number of orders.
CAC
CAC is the total cost of acquiring a new customer, including all marketing and sales spend across every channel.
CPA
CPA is the average advertising cost to acquire one customer or conversion, calculated as total ad spend divided by total conversions.
ROAS
ROAS is the revenue earned for every dollar spent on advertising, expressed as a multiple (4x means $4 back per $1 spent).