What is LTV?
Customer lifetime value, or LTV, is the total gross profit a customer contributes across every order they place, for as long as they keep buying.
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LTV is the number that decides how aggressively you can afford to buy customers. If a customer contributes ₹2,592 in gross profit and costs ₹1,200 to acquire, you can scale confidently. If they contribute ₹900, paid acquisition at that CAC is destroying value however good the ROAS looks.
The discipline that keeps LTV honest is to build it from gross profit, not revenue, and from observed repeat behaviour rather than an assumed lifetime. A young brand simply does not know its true LTV yet, and a modelled figure stretched over three years is a way of justifying a CAC you cannot currently afford.
For most Indian D2C categories we would rather look at a 90-day and a 180-day value than a lifetime one. Those windows are measurable, they map to how quickly cash comes back, and they are hard to argue with. If the 90-day value already covers CAC, the brand can scale on its own cash. If it does not, growth is being funded from somewhere else, and that is a decision the founder should make deliberately.
How LTV is calculated
LTV = AOV × Contribution margin × Purchases per customer
A worked example
A supplements brand has a ₹1,800 average order value, a 45% contribution margin, and the average customer orders 3.2 times before lapsing.
- Gross profit per order = ₹1,800 × 45% = ₹810
- Orders per customer = 3.2
- ₹810 × 3.2 = ₹2,592
LTV = ₹2,592 of gross profit per customer.
Common mistakes
- Calculating LTV on revenue instead of gross profit. Revenue LTV flatters every ratio it touches and cannot be compared to CAC.
- Projecting a lifetime from a brand that is eight months old. Use the repeat data you actually have, not a modelled curve.
- Using a single blended LTV when acquisition channels bring very different customers.
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