Customer lifetime value (LTV)

Customer lifetime value (LTV) predicts the total revenue a customer will generate throughout their relationship with your product. Calculate it by multiplying average purchase value, purchase frequency, and customer lifespan. This metric guides how much you can spend to acquire customers profitably.^[1]

A healthy business maintains an LTV to CAC ratio of at least 3:1, meaning each customer generates 3 times more revenue than it costs to acquire them. Higher ratios indicate more efficient growth. Product improvements that increase retention directly boost LTV by extending customer lifespan.

LTV varies by customer segment, pricing tier, and product usage patterns. Premium customers often have higher LTV despite similar acquisition costs. Understanding these differences helps you focus resources on acquiring and retaining your most valuable customer segments.