Glossary · Core metricsTOFU
LTV (Customer Lifetime Value)
The short answer
LTV (Customer Lifetime Value) is the total value a customer generates over their relationship with your business. The version that matters for marketing decisions is gross-profit LTV: how much profit, after product costs, a typical customer produces.
A customer with a ₹1,800 average order, 2.4 orders a year, 60% gross margin and a two-year lifespan has a gross-profit LTV of about ₹5,184. That's the ceiling on what you could ever sensibly pay to acquire them.
Revenue LTV vs gross-profit LTV
Revenue LTV counts what customers spend. Gross-profit LTV subtracts what the products cost you. Using revenue LTV to justify acquisition spend is one of the most common ways D2C brands talk themselves into unprofitable growth.
How to estimate LTV in practice
- Group customers into monthly cohorts by first purchase date.
- Track cumulative gross profit per customer in each cohort over time.
- Look at how the curve flattens — that's your realistic lifetime.
- Use a conservative horizon (often 12–24 months) for planning.
The LTV:CAC ratio
Divide LTV by CAC. Around 3:1 is a common healthy benchmark; below about 1.5:1 usually means you're buying growth at a loss. But the ratio ignores timing — pair it with payback period.
Simple LTV formula
LTV (gross profit) = average order value × gross margin × purchases per year × expected years as a customer.
Example: ₹1,200 AOV × 55% margin × 3 orders a year × 2 years ≈ ₹3,960 gross profit per customer. Compare with CAC using the CAC:LTV calculator.
LTV in practice
A customer orders four times a year at ₹800 contribution per order for two years: LTV is about ₹6,400. That supports a higher first-order CAC than the first order alone would justify.
How to raise LTV
- Retention journeys
- Subscriptions and replenishment
- Cross-sells
- Excellent service
LTV in India
Indian D2C brands often see a large share of profit from repeat buyers, so LTV — not first-order ROAS — determines how much they can spend to acquire customers.
Frequently asked questions
How do I increase LTV?
Improve retention with lifecycle marketing, raise AOV with bundles and cross-sells, and reduce churn. See CRM and lifecycle marketing.
How far out should LTV be calculated?
Only as far as your data supports and your cash flow can wait. A 12-month LTV is more useful for decisions than a speculative five-year one.
Why use gross profit LTV instead of revenue?
Because acquisition costs must be paid from profit, not revenue.
How do we increase LTV?
Better retention, higher AOV, subscriptions, loyalty programmes and relevant cross-sells.
How do we calculate LTV without much history?
Estimate from early cohorts and refine as data accumulates.
Should LTV include marketplace orders?
If the same customers buy across channels, include them where you can identify them.
Related terms
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