Customer lifetime value (LTV)

Customer lifetime value is an estimate of the total contribution a customer brings over their relationship with the store.

Stock photos and example labels, not customers.

Definition

Customer lifetime value is an estimate of the total contribution a customer brings over their relationship with the store.

FormulaLTV (simple) = AOV x purchases per period x periods x contribution margin

How to use it

It is always an estimate. A simple version multiplies average order value by purchase frequency by expected lifespan, then applies contribution margin. State the period and assumptions with the figure, and do not present a projection as measured.

Related terms

Blended CAC Contribution margin AOV

Go deeper

Measurement

Blended CAC: what it is and when to use it

When platforms disagree about who deserves credit, blended CAC answers a plainer question: what did a new customer cost us in total?

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