LTV is the total gross profit a customer leaves with a brand over the life of the relationship. It covers not only the first order but every repeat purchase. Without knowing LTV you cannot know how much you can afford to spend on advertising, which makes it the foundation of every scaling decision.
In practice most brands fool themselves by calculating LTV on revenue; the correct calculation runs on gross profit. New brands lack the data, so they use a capped 6- or 12-month LTV. Category sets repurchase frequency: cosmetics and food produce high LTV, furniture and appliances very low.
LTV = Average gross profit per order × Annual order frequency × Average customer lifespan (years)
80 TL gross profit per order, 3 orders a year, a 2-year lifespan → LTV = 80 × 3 × 2 = 480 TL.
In practice most brands fool themselves by calculating LTV on revenue; the correct calculation runs on gross profit. New brands lack the data, so they use a capped 6- or 12-month LTV. Category sets repurchase frequency: cosmetics and food produce high LTV, furniture and appliances very low.
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