LTV stands for lifetime value and estimates the revenue or margin a customer generates over the full relationship. LTV tells you how valuable a customer is over time, not just on the first purchase or first month.
LTV tells you how valuable a customer is over time, not just on the first purchase or first month.
| Field | Detail |
|---|---|
| Definition | LTV stands for lifetime value and estimates the revenue or margin a customer generates over the full relationship. |
| Formula | Average Revenue per Customer x Retention or Purchase Frequency Over Time |
| Why it matters | LTV helps marketers decide whether acquisition costs, retention investments, and customer-quality differences are economically healthy. |
| Good benchmark context | LTV matters most in subscription, SaaS, ecommerce, and repeat-purchase businesses where customer value compounds after the first conversion. |
Glossary entries should explain where interpretation goes wrong, not just repeat a formula.
| Common mistake |
|---|
| Estimating LTV without real retention or repeat-purchase behavior. |
| Using revenue-only LTV when margin differences are material. |
| Treating short-term LTV estimates as a stable truth for every cohort. |
LTV helps marketers decide whether acquisition costs, retention investments, and customer-quality differences are economically healthy.
LTV tells you how valuable a customer is over time, not just on the first purchase or first month.
LTV matters most in subscription, SaaS, ecommerce, and repeat-purchase businesses where customer value compounds after the first conversion.
LTV tells you how valuable a customer is over time, not just on the first purchase or first month.
LTV matters most in subscription, SaaS, ecommerce, and repeat-purchase businesses where customer value compounds after the first conversion.