What is Customer Lifetime Value?
Customer Lifetime Value (LTV) is the total margin-adjusted revenue a customer generates over their entire relationship with the business.
Definition
Customer Lifetime Value (LTV) is the total margin-adjusted revenue a customer generates over their entire relationship with the business. It's the single most important number in unit economics — the ceiling on customer acquisition cost (CAC), the floor on retention investment, and the multiplier on every business decision.
The formula (margin-adjusted, cohort-based): LTV = AOV × purchase frequency per year × average years retained × gross margin.
Most LTV calculations skip the gross-margin step, producing a wildly inflated number. A brand with $300 in lifetime revenue at 25% margin has $75 in LTV — not $300.
LTV varies dramatically by vertical: - Dental general-practice patient: $2,500-$4,500 over 5 years. - Orthodontic case: $5,000-$8,000 (single event). - DTC supplement subscriber: $200-$1,500 depending on retention. - B2B SaaS customer: $5,000-$500,000+ depending on segment. - Local-service customer: $1,000-$8,000 depending on category.
The most under-leveraged LTV intervention in every vertical: cadence-driven retention. A 10pp improvement in retention rate often delivers 30-50% LTV lift.
How it works
LTV is computed at three increasing levels of sophistication:
1. Simple LTV: AOV × annual purchases × estimated years. Useful for napkin math; routinely overestimates.
2. Margin-adjusted LTV: simple × gross margin. The unit economics number. CAC should be < 25-30% of margin-adjusted LTV.
3. Cohort LTV: take a 12-month-old cohort. Sum all revenue from those customers. Divide by cohort size. Multiply by margin. This is the empirical number, and it always differs from the simple estimate.
LTV moves with three levers: - AOV: bundles, post-add upsells, free-shipping thresholds. - Frequency: replenishment, routine, subscription conversion. - Retention: cadence-driven recall, winback, retention sequences.
All three levers are operational rather than promotional. A business that invests in operational retention always lifts LTV more than one that invests in acquisition.
Examples and data
LTV improvements from Edynamics engagements:
A dental practice lifted LTV from $2,800 to $4,100 over 12 months by tightening recall cadence and reducing no-shows. Recall cycle dropped from 9 months average to 6 months; retention extended from 4.5 years average to 5.8 years.
A wellness DTC brand lifted LTV from $145 to $310 in 9 months by deploying replenishment reminders + subscription conversion + cross-SKU education. First-to-second purchase rate moved from 23% to 38%; subscription conversion at checkout moved from 8% to 21%.
A law firm lifted LTV from $4,800 to $7,200 by deploying past-client outreach + cross-service introduction sequences. Average client engaged 1.8 service categories instead of 1.2; multi-engagement retention extended 30%.
LTV doubling inside 12 months is not unusual when operational retention systems run.
The Edynamics lens
LTV is the metric Edynamics optimises against. Every playbook is judged on its LTV impact, not its revenue impact. The compounding curve is the LTV curve. The retention engineering is the LTV-multiplication engine.