LTV (lifetime value), short for Customer Lifetime Value (CLV), is the total revenue a customer is expected to generate over their entire relationship with your company. The formula is Average Purchase Value × Average Purchase Frequency × Average Customer Lifespan. A healthy business keeps LTV at least 3× its acquisition cost.
What Is LTV (Lifetime Value)?
LTV, short for Customer Lifetime Value (CLV), represents the total amount a customer is expected to spend on your products or services across their entire relationship with you — from first purchase to last.
LTV Formula
LTV = Avg Purchase Value × Avg Purchase Frequency × Avg Customer LifespanTotal value over the full relationship
- Average purchase value: total revenue ÷ number of orders
- Average purchase frequency: orders ÷ unique customers
- Average customer lifespan: how long customers keep buying
Worked example
An online store with a $50 average order, 4 purchases a year, over a 3-year lifespan:
$50 × 4 × 3 = $600 LTVValue per customer over their lifetime
LTV vs CLV — Are They Different?
No. Lifetime Value (LTV) and Customer Lifetime Value (CLV/CLTV) are the same metric, just different names. Startups tend to say "LTV"; enterprises lean toward "CLTV." Both measure total revenue per customer over the full relationship, including repeat purchases and upgrades.
Why LTV Matters
- Sets a ceiling on how much you can spend to acquire a customer (CAC).
- Identifies your most valuable customer segments.
- Guides product, pricing, and marketing decisions.
- Helps forecast future revenue and overall business health.
LTV:CAC Ratio
The most important way to use LTV is against acquisition cost. Aim for an LTV:CAC ratio of 3:1 or higher for healthy, sustainable growth — each customer should return at least three times what it cost to win them.
How to Increase LTV
- Improve retention: loyalty programs, great support, personalization (a 5% retention lift can raise profits 25–95%).
- Increase frequency: cross-sell and upsell, targeted promotions.
- Raise order value: bundles, premium tiers, volume discounts.
LTV FAQ
How do you calculate LTV?
Multiply average purchase value by purchase frequency by customer lifespan: $50 × 4 × 3 = $600. For subscriptions, a common shortcut is average revenue per customer ÷ churn rate.
What's the difference between LTV and CLV?
None — they're the same metric. LTV (lifetime value) and CLV/CLTV (customer lifetime value) both measure total revenue from a customer over their full relationship with you.
What is a good LTV:CAC ratio?
3:1 or higher is the healthy benchmark — each customer returns at least three times their acquisition cost. Much higher (e.g. 5:1+) can signal underinvestment in growth.
How do you increase customer lifetime value?
Boost retention, increase purchase frequency through upsells and cross-sells, and raise average order value with bundles and premium offerings.
