LTV, Lifetime Value

LTV is the long-game metric. A customer who buys once for $80 has an LTV of $80. A customer who buys five times totaling $350 has an LTV of $350. The second customer is worth acquiring at a much higher CAC.

There are two versions: revenue LTV (total spend) and profit LTV (total contribution margin). Revenue LTV is easier to calculate. Profit LTV is what matters for business decisions. A high-AOV but high-return customer might have a lower profit LTV than a moderate-AOV customer who keeps everything.

LTV informs how much you can afford to spend to acquire a customer. If your 12-month LTV is $200 and your target payback period is 12 months, you can spend up to $200 in CAC and still be profitable - though most brands target a payback period of 3-6 months to protect cash flow.