LTV (Customer Lifetime Value) is the total revenue a customer generates during their relationship with your business. Calculate it: LTV = (Average Purchase Value × Purchase Frequency × Customer Lifespan). Example: $50 avg purchase × 10 purchases/year × 3 years = $1,500 LTV.
- 3:1
- target LTV:CAC ratio — IdeaProof Research 2026
- 5-25%
- revenue from upsells — IdeaProof Research 2026
- 5%
- retention boost = 25-95% profit — IdeaProof Research 2026
- 6-7x
- cost to acquire vs retain — IdeaProof Research 2026
LTV (Customer Lifetime Value) is the total revenue a customer generates during their relationship with your business. Calculate it: LTV = (Average Purchase Value × Purchase Frequency × Customer Lifespan). Example: $50 avg purchase × 10 purchases/year × 3 years = $1,500 LTV. Healthy business: LTV should be 3x CAC (Customer Acquisition Cost). Increase LTV through upsells, retention, and reducing churn. SaaS LTV: Monthly Revenue × Gross Margin ÷ Churn Rate.
Key Customer Lifetime Value Takeaways
- LTV = Average Purchase × Frequency × Lifespan
- SaaS LTV = Monthly Revenue × Gross Margin ÷ Churn Rate
- Healthy LTV:CAC ratio is 3:1 (LTV should be 3x CAC)
- Increase LTV: Upsells, cross-sells, reduce churn, increase engagement
- Track LTV by customer segment to optimize marketing spend
- High LTV customers deserve more acquisition investment
Expert Tips
Segment LTV by cohort
Different customer segments have vastly different lifetime values
Focus on retention first
Reducing churn by 5% can increase profits 25-95%
Include upsell revenue
Expansion revenue can be 20-30% of total LTV for SaaS
Calculate by acquisition channel
Customers from different channels often have different LTVs
Recommended Tools & Resources
ChartMogul
Subscription analytics and LTV tracking
Your Next Steps
Sources & Citations
- [1]IdeaProof Research 2026
Cite this page
IdeaProof. (2026). What is LTV (Customer Lifetime Value) and How to Calculate It?. IdeaProof. Retrieved from https://ideaproof.io/questions/what-is-ltvLast verified: