LTV (Customer Lifetime Value)

Category: Metrics

The total gross-margin revenue a customer generates over their full relationship with your business.

For subscription businesses: LTV ≈ ARPU × gross margin ÷ churn rate. For transactional: average order value × orders/year × retention years × gross margin. LTV is only useful next to CAC. A 3:1 ratio is the accepted health floor. Cohort LTV curves are far more actionable than a single blended number.

Related terms

• CAC (Customer Acquisition Cost)
• Churn

Part of the AMA Orlando marketing glossary. See also the chapter's free marketing calculators and templates and playbooks.