The total revenue (or profit) a business expects to earn from a single customer over the entire duration of the relationship.
Deeper Explanation
LTV is the revenue counterpart to CAC. A subscription business with ₹1,000/month revenue, 95% annual retention, and 70% gross margins generates substantial LTV per customer — potentially ₹100,000+ over a long relationship. LTV depends on three variables: average revenue per user (ARPU), gross margin, and churn rate. The churn rate is the most powerful: a business retaining 95% of customers annually has an average customer life of 20 years; one retaining 70% has a life of only 3 years. LTV is where compounding operates at the customer level — high retention multiplies the return on every customer acquisition investment.
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