---
title: Lifetime Value (LTV) | RGM® Glossary
url: https://realgrowthmatters.com/glossary/lifetime-value/
updated: 2026-06-10
source_html: https://realgrowthmatters.com/glossary/lifetime-value/
---

# Lifetime Value

/ˈlaɪfˌtaɪm ˈvælju/noun (initialism: LTV / CLV)

What a customer is worth over the whole relationship — the value side that sets how much you can spend to win them.

Term
:   Lifetime Value

Abbreviation
:   LTV / CLV

Part of speech
:   Noun

Field
:   Growth Economics

## Forms & parts of speech

lifetime value · noun

The total profit expected from a customer over the relationship.

"High **lifetime value** lets us outbid competitors for the same customer."

LTV / CLV · noun (initialism)

Common shorthand for the metric.

"Our 12-month **LTV** is $640, which comfortably clears our $200 CAC."

## Definition in plain terms

Lifetime value is what a customer is worth to you over the whole relationship — the gross profit they generate across every purchase, minus the cost to serve them, for as long as they stay. It answers the question that decides how much you can afford to spend acquiring them.

## The mechanics

The simplest form multiplies average purchase value by purchase frequency by customer lifespan, then applies your gross margin. Lifespan is driven by retention: the longer customers stay, the higher LTV climbs. More rigorous versions discount future value to today and predict lifespan from cohort data rather than assuming it.

## When it matters

LTV sets the ceiling on acquisition. If a customer is worth $900, you can afford a healthy CAC and still profit; if they're worth $150, the same CAC is fatal. Raising LTV — through retention, higher order value, or cross-sell — widens the gap between value and acquisition cost, which is the engine of durable, fundable growth.

**Worked example.** A subscription customer pays $40/month at 70% gross margin and stays, on average, 20 months. LTV ≈ $40 × 0.70 × 20 = $560. Against a $200 CAC that's an LTV:CAC of 2.8×. Lifting average lifespan to 28 months (via better retention) raises LTV to ~$784 and the ratio to ~3.9× — without spending a cent more on acquisition.

**Failure modes to watch.** Using revenue instead of gross profit (overstating value); assuming an optimistic lifespan instead of measuring it from cohorts; and ignoring the time value of money on long payback horizons. Optimistic LTV is the most common way growth models flatter themselves.

## Formula

LTV = Average order value × Purchase frequency × Customer lifespan × Gross marginLifespan is set by retention. Discount future value for long horizons; predict lifespan from cohort data rather than assuming it.

## Benchmarks

LTV itself has no universal benchmark; what matters is its ratio to CAC and how reliably lifespan is measured rather than assumed.

Healthy LTV:CAC ratio

~3× or higher (rule of thumb)

Below ~1× LTV:CAC

You lose money on every customer

Above ~5×

May signal under-investment in growth

Calculators

[LTV calculators →](/tools/ltv-calculator/)

Ranges are illustrative; every published figure is cited from a named public source or labelled “RGM analysis.”

## Synonyms & antonyms

### Synonyms

customer lifetime valueCLVCLTVlifetime customer value

## Usage trends

Search interest for this term over the last five years:

[View interest-over-time on Google Trends →](https://trends.google.com/trends/explore?q=customer%20lifetime%20value&date=today%205-y)

## Common questions

What is the difference between LTV and CLV?
:   None substantive — LTV (lifetime value) and CLV/CLTV (customer lifetime value) refer to the same metric.

Should LTV use revenue or profit?
:   Gross profit. Using revenue overstates what a customer is actually worth to the business.

Why does retention drive LTV?
:   Lifespan is a direct input to LTV, and retention determines lifespan — customers who stay longer accrue more value.

## Related tools & calculators

- calculator[Lifetime value calculator](/tools/ltv-calculator/)
- calculator[LTV:CAC ratio calculator](/tools/ltv-to-cac-ratio-calculator/)
- calculator[CAC payback period calculator](/tools/cac-payback-period-calculator/)

## Resources & people to follow

- book*Lean Analytics* — Croll & Yoskovitz
- thought leaderDavid Skok (For Entrepreneurs) — SaaS unit economics
- thought leaderPeter Fader — customer-base analysis & CLV research

Curated, non-competitor resources verified per term.

## Related training

- module[Subscription growth](/training/subscription-growth/)
- module[DTC growth](/training/dtc-growth/)
- module[Marketing analytics](/training/marketing-analytics/)

## Disciplines

Areas of marketing where lifetime value is a core concern:

[Growth marketing](/training/growth-marketing-foundations/)[Lifecycle marketing](/training/email-lifecycle-marketing/)[Marketing analytics](/training/marketing-analytics/)[Subscription & SaaS](/training/subscription-growth/)

## Read next

## Related terms

[Customer acquisition cost](/glossary/customer-acquisition-cost/)[LTV:CAC ratio](/glossary/ltv-cac-ratio/)[Retention](/glossary/retention/)[Churn rate](/glossary/churn-rate/)[Net revenue retention](/glossary/net-revenue-retention/)

## Sources

1. trends[Google Trends — "customer lifetime value"](https://trends.google.com/trends/explore?q=customer%20lifetime%20value&date=today%205-y)