Customer Lifetime Value
Definition
Customer Lifetime Value: Customer Lifetime Value (LTV) is the total revenue a business can expect from a single customer account over the entire relationship. LTV is calculated using average revenue per account, gross margin, and customer lifespan. Understanding LTV helps determine how much to spend on acquisition.
Example Usage
“With an LTV of $3,000 and CAC of $500, we have a healthy 6:1 LTV:CAC ratio.”
Common Misconceptions
Related Terms
Customer Acquisition Cost
Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer, including marketing, sales, and onboarding expenses. CAC is calculated...
LTV to CAC Ratio
The LTV to CAC ratio compares customer lifetime value to the cost of acquiring that customer. A ratio of 3:1 or higher is generally considered healthy...
Net Revenue Retention
Net Revenue Retention measures the percentage of recurring revenue retained from existing customers over a period, including expansions, contractions,...
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