What is LTV?
LTV is the total gross profit one customer generates across their whole relationship with your brand. Not revenue. Profit. Average order value multiplied by gross margin multiplied by how often they buy, held to a window you can actually defend. Get those three inputs right and LTV becomes the number that tells you what you are allowed to pay for a customer.
Customer Lifetime Value
How LTV actually works
Start simple. AOV times gross margin percentage times purchase frequency over twelve months, because anything longer than a year on a young brand is a guess wearing the clothes of a forecast.
Say a Bengaluru skincare brand does Rs 1,400 AOV at 62 percent margin and the average customer buys 2.8 times a year, which puts roughly Rs 2,430 of gross profit against each customer annually and hands you an acquisition ceiling you can defend in a board meeting. Now you can spend.
Category changes everything. Coffee, supplements and pet food repeat on their own. Mattresses do not.
Where teams get LTV wrong
Using revenue instead of margin is the big one. It inflates the number two or three times over and gives everybody in the room permission to overspend on acquisition. What you can spend against is profit.
The second trap is projecting a lifetime from three months of data, which produces a confident figure about a year you have not lived through yet. Model twelve months. Update as cohorts mature.
Third, averaging across everyone. LTV is a distribution, not a number, and customers acquired on a 40 percent discount behave so differently from full-price buyers that most brands, once they split the two, discover their discount cohort is worth barely more than its first order.
What good looks like in India
A workable target is LTV to CAC around 3 to 1 on a twelve-month view. Below 2 you are buying revenue rather than building anything, and far above 4 you are probably underinvesting in growth while sitting on an audience you could be expanding into much harder than you are.
WhatsApp shifts this maths more than most Indian brands account for. A clean opted-in list drives repeat orders at a fraction of what retargeting costs, pushing LTV up without touching acquisition at all. Building that list is usually the cheapest LTV work available.
Related terms: Map Pack · Marketplace vs Own Store · MER.
Where this shows up in the work: AI & Data Analytics · Full glossary.
LTV — questions, answered.
Twelve months for most e-commerce brands. It is long enough to capture a real repeat cycle and short enough that you are reporting observed behaviour rather than a model. Subscription businesses can stretch to 24 months once they have that history.
No. LTV runs on gross profit, revenue per customer runs on turnover, and confusing the two is exactly how brands end up paying Rs 2,000 to acquire someone worth Rs 800 in actual margin.
Last updated 2026-08-08
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