LTV
Customer lifetime value
LTV (Customer Lifetime Value) is the lifetime value of a customer, that is, an estimate of the total profit or revenue a single customer generates over the entire relationship. It shows how valuable retaining a customer is and helps decide how much it pays to invest in acquiring one.
How LTV is calculated
LTV is based on how much a customer spends with you on average per purchase, how often they buy, and how long they stay loyal. The higher the average order value, the more frequent the purchases, and the longer the relationship, the higher the lifetime value.
That is exactly why LTV is closely tied to churn. If customers leave quickly, their lifetime value drops even when a single purchase is large. Conversely, extending the relationship and repeat purchases raise LTV without you having to acquire new customers.
Why LTV matters
LTV shifts the view of a customer from a one-off purchase to a long-term relationship. That fundamentally affects how much you are willing to invest and where to direct your energy.
- It shows how much you can afford to pay to acquire a new customer.
- It helps decide whether it pays more to win new ones or retain existing ones.
- It reveals the most valuable customer segments worth the most attention.
- Combined with acquisition cost, it shows the true health of the business.
How to increase LTV
The two most effective levers are extending the relationship and raising the value of purchases. Good care, loyalty mechanics, add-on selling, and above all giving the customer value so they have no reason to leave all help.
Order in your data plays a big role. A CRM system shows who your most valuable customers are, when they last bought, and who is at risk of leaving, so you can work with them deliberately and keep the relationship as long as possible.
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Explore our CRM solutionsFrequently asked questions
What is the difference between LTV and the value of a single order?
Average order value tells you how much a customer spends per purchase. LTV counts the whole relationship, that is, all purchases over the entire time they stay loyal. That is exactly why LTV is a better measure of a customer’s long-term value.
Why does LTV matter for an advertising budget?
Because it determines how much you can afford to pay to acquire a customer. When you know the value a customer brings over the whole relationship, not just on the first purchase, you can invest more in winning them and still stay profitable.
How can I increase LTV?
By extending the relationship and raising the value of purchases. Good care, loyalty programs, add-on and cross-selling, and reducing churn all help. The key is to keep delivering value so the customer has no reason to switch to a competitor.