What is Customer Lifetime Value (CLV/LTV)?
The total revenue a business expects to earn from a single customer account throughout their relationship.
Deep Dive
CLV tells you how much a customer is truly worth. If a customer pays ₹1,000/month and stays for 2 years, their CLV is ₹24,000.
Knowing this number is critical because it tells you how much you can afford to spend on ads (CAC) to acquire them.
Key Takeaways
- The 'North Star' metric for SaaS and e-commerce.
- LTV:CAC ratio of 3:1 is the industry benchmark.
- Increased by upselling and reducing churn.
- More important than short-term revenue.
Why This Matters Now
LTV changes your mindset from 'Hunter' (get the sale) to 'Farmer' (nurture the relationship).
It shifts focus to the post-purchase experience. Customer Service, onboarding, and loyalty programs are all 'LTV Optimization' strategies.
Common Myths & Misconceptions
It's easy to calculate.
Reality:Historical LTV is easy. *Predictive* LTV (guessing how long a new customer will stay) is very hard data science.
Revenue is LTV.
Reality:Profit is LTV. If you have low margins, a high-revenue customer might actually have low LTV profitability.
Real-World Use Cases
VIP Treatment: Identifying the top 10% of customers by LTV and sending them a physical gift. It costs money, but keeps the high-rollers happy.
Ad Bidding: Telling Google Ads to bid 2x higher for users who match the profile of your High-LTV customers.
Frequently Asked Questions
How do I increase LTV?
Raise prices, cross-sell other products, or just make the product better so they stay longer (retention).
Why is 3:1 ratio important?
1x covers the ad cost. 1x covers your overhead/salaries. The final 1x is your profit.
We Can Help With
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