How Customer Lifetime Value (LTV) Works
LTV can be modeled from revenue, gross margin, repeat-purchase behavior, retention and a defined time horizon.
A Simple Example
A customer who buys $500 initially and produces another $150 in expected gross profit over two years has more value than the first order alone shows.
Why Customer Lifetime Value (LTV) Matters
LTV helps set acquisition limits and compare customer cohorts with different repeat behavior.
Common Misreading
Revenue is not profit, and distant future value is uncertain. State whether LTV means revenue, gross profit or contribution profit and over what period.