Customer lifetime value (LTV) is the total gross profit a business expects to earn from a customer across the entire relationship, not just their first purchase.
In depth
A simple estimate is average order value × purchase frequency × customer lifespan, adjusted for margin. LTV sets the ceiling on what you can afford to spend to acquire and retain a customer, which is why email — a cheap retention channel — raises LTV so effectively.
Example
A customer spends $60 per order, buys 4 times a year, and stays 3 years: gross LTV = 60 × 4 × 3 = $720. At a 50% margin that is $360 of profit — the true budget available to acquire and keep them. Repeat purchases driven by email lift this number directly.
Related terms
Model LTV against acquisition cost in our free CAC & LTV calculator.