How do you calculate LTV?

LTV ≈ average order value × gross margin × purchases per customer. For example: A ₹1,200 average order, 50% gross margin and 3 orders per customer gives an LTV of about ₹1,800.

What Is LTV? Definition, Formula and Example

What is LTV (customer lifetime value)?

LTV is the total gross profit a customer brings your brand over the whole relationship, from the first order through every repeat purchase.

FormulaLTV ≈ average order value × gross margin × purchases per customer

For D2C brands, repeat rate drives LTV. A skincare brand whose customers reorder every 45 days has a very different LTV from a furniture brand with one purchase per customer.

Use profit, not revenue. A revenue-based LTV makes almost any acquisition cost look affordable.

Example

A ₹1,200 average order, 50% gross margin and 3 orders per customer gives an LTV of about ₹1,800.

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