# What is LTV (customer lifetime value)?

> LTV is the total profit you expect from one customer across all their orders. Formula, a worked example in rupees and how to raise it.
- **Author**: Marxx
- **Published**: 2026-11-24
- **Category**: Metrics
- **URL**: https://marxx.ai/library-glossary/ltv

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LTV (customer lifetime value) is the total profit you expect from one customer across every order they place with you. It tells you how much you can spend to win a customer and still come out ahead.

## The formula

LTV = average order value x gross margin % x orders per customer

Use profit, not revenue. Revenue makes every customer look richer than they are. See [gross margin](/glossary/gross-margin) and [AOV](/glossary/aov).

## A worked example

Say a skincare brand has these numbers:

- Average order value: INR 900
- Gross margin: 55%, so INR 495 profit per order
- Customers place 4 orders in 18 months
- CAC (cost to win one customer): INR 700

LTV = 900 x 0.55 x 4 = **INR 1,980**

Profit per customer after CAC = 1,980 − 700 = **INR 1,280**. The [LTV to CAC ratio](/glossary/ltv-to-cac-ratio) is 1,980 / 700 = 2.8.

Build LTV from your own order data in the free [LTV to CAC calculator](/ltv-cac-calculator).

## Why the first order can look bad

| Order | Profit | Running total | After INR 700 CAC |
|---|---|---|---|
| 1 | INR 495 | INR 495 | −INR 205 |
| 2 | INR 495 | INR 990 | +INR 290 |
| 3 | INR 495 | INR 1,485 | +INR 785 |
| 4 | INR 495 | INR 1,980 | +INR 1,280 |

On the first order you lose INR 205. By the second order you are ahead. If you judge ads only on first-order [ROAS](/glossary/roas), you may switch off ads that pay back. How long it takes is your [CAC payback period](/glossary/cac-payback-period).

## Count only what you have seen

Group customers by the month of their first order. This is a cohort. Count how many orders each cohort placed in 3, 6 and 12 months. Use those real repeat rates, not guesses, and pick a window you have data for.

## How to raise LTV

1. Get more repeat orders: reorder emails or messages at the time the product runs out.
2. Raise order value with bundles.
3. Raise margin: better sourcing or fewer discounts.
4. Lower returns, since each return takes profit away.

## FAQ

### Should LTV use revenue or profit?

Profit. Revenue ignores what the product cost you, so it overstates what a customer is worth.

### What time window should I use?

One you can measure, such as 12 months. A longer guess is only a guess.

### What is a good LTV?

There is no single number. Compare it with your CAC. A common starting point is to aim for an LTV well above CAC and check how fast you earn the CAC back.

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