What is customer lifetime value (LTV)?

Customer lifetime value (LTV or CLV) is the total revenue you expect from a customer across the entire time they buy from you, not just their first order. It is the number that turns a nervous-looking acquisition cost into a sound investment: paying $80 to win a customer worth $400 over three years is a bargain.

How to calculate it

A practical formula is LTV = average order value x orders per year x lifespan in years. For lifetime profit instead of revenue, multiply by your gross margin. Our LTV calculator does the arithmetic.

Why LTV is a competitive weapon

The business that knows its true LTV can afford to pay more to acquire a customer and still come out ahead, which lets it outbid competitors who only look at the first purchase. But that edge only holds if LTV and acquisition cost are measured against the same customers, tied to the same acquisition source.

Trakt attributes each customer to the campaign that won them and counts their repeat orders, so you can see LTV by acquisition source and know exactly how much you can afford to spend to grow.