Revenue LTV flatters: it ignores product cost, fulfilment and fees. Contribution LTV, the money you actually keep from a customer's orders, is the version that can be compared with CAC.
Always state the horizon. A 12-month LTV and a 36-month LTV are different numbers, and the longer horizon depends on retention assumptions that are hard to prove for young brands.
Formula
Contribution LTV = Orders per customer over the horizon × AOV × Contribution margin
Example
A customer who places 2.2 orders over 24 months at a ₹1,500 AOV and a 40% contribution margin has a 24-month LTV of ₹1,320.
Model contribution lifetime value from repeat behaviour, then see your LTV:CAC ratio and payback month.
Related terms
- LTV:CAC ratioThe LTV:CAC ratio compares the lifetime value of a customer with the cost of acquiring them.
- CAC (customer acquisition cost)CAC is the total cost of acquiring a new customer, usually marketing spend divided by the number of new customers it produced.
- Repeat purchase rateRepeat purchase rate is the share of customers who place a second order within a set period, usually 12 months.
- Cohort analysisCohort analysis groups customers by when they were acquired and tracks how each group behaves over time.
Part of the growth marketing glossary by Shiva Sharma.