What is Customer Lifetime Value? [Hint: long-term value creation]
Customer Lifetime Value (LTV) is how much a customer is worth to your business over time.
Definition
LTV = Average order value × Purchase frequency × Customer lifespan
Why it matters
LTV tells you the real value of your customer base.
Not just a single transaction but the relationship.
- High LTV means loyal customers, repeat purchases, strong brand connection
- Low LTV means one-off transactions, weak retention
What most people miss
LTV is what justifies CAC (and we covered CAC in the previous post) If your LTV is high the. you can afford to spend more to acquire customers.
If it’s low then your growth model breaks very quickly. This is where most brands get it wrong: they will focus on acquisition and ignore retention.
Bottom line
Strong brands build lifetime value because repeat customers are where profit compounds.
Discussion
- What is your current repeat purchase rate?
- How long does a typical customer stay with your brand?
- Where are you actively increasing LTV (product, experience, community)?
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What is Customer Lifetime Value? [Hint: long-term value creation]
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