LTV · customer lifetime value
LTV (customer lifetime value) is the total margin a customer generates over their entire relationship with you, accounting for purchase frequency and average customer lifetime.
The formula
LTV = Margin per purchase × Annual frequency × Lifetime (years)
A concrete example
Example
$60 of margin per order, 4 orders per year, a 3-year relationship: LTV = 60 × 4 × 3 = $720.
Why it matters
LTV sets the ceiling on what you can invest to acquire a customer. The higher it is, the more you can afford an aggressive CAC and dominate your market.