Customer Lifetime Value

Customer Lifetime Value (LTV, also written CLV or CLTV) is the total revenue a customer generates for a business across all their purchases over their entire relationship with the brand.

It is the most important demand-side metric in D2C because it defines how much you can profitably spend to acquire a customer — your acquisition ceiling.

Simple vs. Predictive LTV

Historical LTV — the average total revenue from customers acquired in a given cohort, measured after enough time has passed to observe their full purchase behavior. Clean and accurate but backward-looking.

Predictive LTV — an estimate of what a new customer will spend over their lifetime, based on historical cohort behavior. Used to make current investment decisions.

Most growing brands work with predictive LTV because they need to know whether today’s CAC is sustainable before waiting 3 years to see how a cohort behaves.

Why LTV Varies So Dramatically

LTV is driven by three variables:

• Average order value (AOV) — how much each purchase is worth
• Purchase frequency — how often a customer buys
• Retention / churn — how long a customer stays active

A supplement brand with $60 AOV and 8 purchases per year has far higher LTV than an accessories brand with $150 AOV and 1.2 purchases per lifetime — even though the accessories brand has higher per-order revenue.

LTV:CAC and What Counts as Healthy

The LTV:CAC ratio is the primary viability test for a D2C growth model:

Ratio	Signal
5:1+	Strong unit economics, room to scale
3:1	Healthy, typical benchmark
1.5–3:1	Marginal, tight on payback
Below 1.5:1	Likely losing money per customer

The 3:1 benchmark is widely cited, but the appropriate ratio depends heavily on payback period. A 3:1 LTV:CAC with a 24-month payback is far more cash-intensive than a 2:1 ratio with a 3-month payback.

LTV and Paid Media Strategy

Knowing your LTV by acquisition channel is strategically powerful. If customers acquired through Meta Ads have 40% higher LTV than those from Google Shopping, you can justify a higher CAC target on Meta even if the first-order ROAS looks equal.

This is why cohort LTV analysis — tracking customers by acquisition date and channel — is one of the most valuable investments a growing D2C brand can make.