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 changes how you see marketing — from a cost to an investment. If you know a customer is worth ₹15,000 over their lifetime, you can confidently spend more to get them than a competitor who only counts the first purchase.
The key inputs are average order value, how often customers buy, and how long they stay (or churn rate for subscriptions). Improving retention raises LTV without spending anything extra on acquisition.
LTV is most powerful as a ratio with CAC. An LTV:CAC of 3:1 means healthy economics; a very high ratio with slow growth can mean you are actually under-spending on growth and leaving demand on the table.
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 sales and marketing cost 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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