Lifetime Value (LTV), also called Customer Lifetime Value (CLV), is a metric that estimates the total revenue or profit a business can expect to earn from a customer throughout the entire relationship. LTV helps businesses understand how much a customer is worth over time, making it easier to determine appropriate marketing budgets, customer acquisition costs, and retention strategies.
A higher LTV generally indicates stronger customer loyalty, repeat purchases, or long-term service agreements. Businesses often compare LTV to Customer Acquisition Cost (CAC) to evaluate the profitability of their marketing and sales efforts. As a general benchmark, many businesses aim for an LTV ratio of at least 3:1, although the ideal ratio varies by industry and business model.
Improving LTV typically involves increasing customer retention, encouraging repeat business, expanding service offerings, and delivering a better overall customer experience.
Example: A law firm client retains your agency for SEO services at $2,000 per month for 24 months. That client’s LTV would be $48,000 in revenue before accounting for servicing costs.