Lifetime Value of Customer (LTV)

What is Customer Lifetime Value (LTV)?

Customer Lifetime Value (LTV or CLTV) is the predicted total net profit a customer will generate for a business across the entire duration of the customer relationship. LTV is typically modelled using gross margin, retention rate, expansion revenue, and discount rate.

LTV vs. CAC (customer acquisition cost) is the principal unit-economics ratio used to evaluate marketing efficiency, with industry benchmarks suggesting LTV:CAC ≥ 3× and CAC payback ≤ 12-18 months for healthy SaaS businesses.