Paid Media

LTV (Customer Lifetime Value)

Quick definition

The total revenue a customer generates over their entire relationship with your brand.

What it actually means

LTV varies wildly by category: consumables and subscription brands see LTV of 2-5x AOV within 12 months; one-off purchase categories may have LTV barely above first-order AOV. Calculating LTV honestly requires cohort analysis — group customers by acquisition month, track their cumulative revenue at month 3, 6, 12, 24. Brands often quote LTV based on top-decile customers, inflating the actual number by 3-5x. Sophisticated DTC operators report LTV:CAC ratio (target 3:1 or higher) and 12-month payback period.

Related terms

CAC (Customer Acquisition Cost)

Total marketing spend divided by new customers acquired in the same period.

AOV (Average Order Value)

Total revenue divided by total orders in a period.

Retention (DTC)

The rate at which existing customers continue purchasing. Drives LTV and lowers blended CAC payback.

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