Pillar Guide · Lead Generation Consulting℠
What Is Customer Lifetime Value (LTV)?
Customer lifetime value (LTV) is the total revenue or profit a customer brings over the life of the relationship. It sets the ceiling on what you can afford to spend to acquire them.
Why LTV matters
LTV tells you how much a customer is worth, which tells you how much you can invest to win and keep them.
Businesses with high LTV can afford more aggressive acquisition; low-LTV models must acquire cheaply.
How to think about LTV
At its simplest, LTV combines average revenue, margin, and how long customers stay. Retention is a huge lever.
LTV and CAC together
A healthy ratio of LTV to CAC is the core signal of a sustainable growth model.
Key takeaways
- LTV is a customer's total value over time
- It sets your acquisition budget ceiling
- Retention strongly drives LTV
- Judge LTV against CAC for sustainability
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FAQ
Common questions.
How is LTV calculated?
At its simplest, average revenue times margin times average customer lifespan — retention is a major lever.
What is a healthy LTV-to-CAC ratio?
It varies by model, but the value earned should comfortably exceed the cost to acquire, within a reasonable payback window.