Marketing & Sales Metrics

LTV (Lifetime Value)

Total revenue (or profit) one customer generates over their entire relationship with the business.

LTV is the counterpart to CAC. Formula varies: simple LTV = Average order value × Purchases per customer × Years retained. Profit-based LTV multiplies this by gross margin to remove COGS.

For subscription businesses: LTV = (Monthly ARPU × Gross margin) / Monthly churn rate. So a SaaS with ₹2,000 ARPU, 80% margin, 5% churn has LTV of ₹32,000.

Indian SMBs often overestimate LTV by ignoring refunds, returns, and churn. Cohort-based LTV (calculating LTV per acquisition month) is the most accurate way.

India context

Indian D2C brands typically have LTV in ₹1,500-₹6,000 range. SaaS products at LTV ₹15,000-₹50,000. Both numbers look bigger than the West relative to revenues but smaller in absolute terms — the math works because Indian CAC is also lower.

Examples

  • A salon: avg visit ₹600, 4 visits/year, 3 years retention = ₹7,200 LTV.
  • A clinic: avg consultation ₹500, 8 visits/year, 5 years = ₹20,000 LTV.

FAQ

Should LTV be revenue or profit?

Profit (multiply by gross margin) for serious decisions. Revenue LTV for quick benchmarks. Always specify which one you're showing.

How do I improve LTV?

Three levers: increase order frequency (re-engage lapsed), increase order size (upsell, bundles), reduce churn (better onboarding, success). Frequency is usually the easiest lever.

What's the right time horizon for LTV?

Match it to your customer's actual lifetime. Salon clients last 3-5 years; SaaS clients 2-7 years. Don't artificially cap at 12 months — that understates LTV significantly.

Related concepts

CACROASAOVchurn rateARPUretention

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Related glossary entries

CAC (Customer Acquisition Cost) — Total marketing + sales spend divided by new customers acquired — measures how much it costs to bring in one customer.ROAS (Return on Ad Spend) — Revenue generated per rupee of ad spend — direct measure of advertising efficiency.AOV (Average Order Value) — Average rupee value per customer transaction — key revenue lever for ecommerce.Churn — % of customers who cancel or stop subscribing in a period — one of the most important SaaS health metrics.

More in Marketing & Sales Metrics

CAC (Customer Acquisition Cost)ROAS (Return on Ad Spend)MRR (Monthly Recurring Revenue)AOV (Average Order Value)RTO (Return to Origin)GMV (Gross Merchandise Value)ChurnMQL (Marketing Qualified Lead)
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