Unit Economics

Customer Lifetime Value

See a customer as a whole relationship, not one sale, and find the lever that quietly decides everything.

  • Beginner
  • 6 min total
  • 10 chapters

What decision this helps you make: Whether to invest in keeping customers or only in finding new ones.

What this topic is

Customer lifetime value (LTV) is the total profit a customer generates across the whole relationship: every repeat purchase, not just the first sale.

Why it matters

It decides how much you can afford to spend to win a customer, and reveals that keeping customers is often far more profitable than chasing new ones.

Who should learn it

Any business with repeat customers or subscriptions, and anyone weighing whether to pour money into acquisition or into retention.

What you will understand

  • Estimate what a customer is worth over their whole lifetime, not one order
  • Compare lifetime value to acquisition cost with the LTV:CAC ratio
  • See how a small lift in retention compounds into large profit gains
  • Decide when keeping customers beats constantly finding new ones

Prerequisites

Common misconception

"A customer is worth whatever they spend on their first order." Most of a customer's value comes from purchases you have not seen yet. Judging them on order one badly undervalues retention.