LTV (Lifetime Value)

In one line

LTV (Lifetime Value) is the total revenue a single customer generates before churning. The simplest version is ARPU × average lifespan.

Why it's always an estimate

LTV depends on the future, so it can't be measured with certainty — only estimated. Better retention means customers stick around longer, which raises LTV. Early cohorts are especially prone to over- or under-estimation, since there isn't much data yet.

Where it's used

LTV pairs with CAC in the LTV:CAC ratio to judge whether it's worth continuing to spend on a channel. 3:1 is a commonly cited healthy benchmark, but the right threshold varies a lot by industry and margin structure.

Go deeper

How to calculate LTV:CAC and interpret it is covered in LTV:CAC Ratio.