LTV (Customer Lifetime Value)
Lifetime Value
The total value (revenue or profit) a single customer brings to a company over the entire course of their relationship.
In Simple Terms
LTV is a number that represents how much a single customer spends in total over time. For example, it's used to compare a customer who spends ¥10,000 in a single purchase versus a customer who continues a ¥1,000/month subscription for 36 months. In this case, the first customer's LTV is ¥10,000, while the second customer's is ¥36,000 — making the second customer's LTV higher. Companies use this as a benchmark when deciding which customer relationships to prioritize.
Behind the Name
LTV stands for "Lifetime Value." "Lifetime" refers to the full duration of a customer's relationship with a business, and "Value" refers to the revenue or profit generated during that time. Together, LTV represents the total amount a single customer contributes to a company from their very first purchase to their last.
Take a Closer Look!
LTV is a metric that measures how much revenue or profit a customer generates for a specific company or brand from the start to the end of their relationship.
Rather than focusing solely on one-time transactions, LTV quantifies the long-term value of a single customer by factoring in repeat purchases and the length of their engagement.
A simple calculation formula is: purchase amount per transaction × purchase frequency × duration of relationship — this yields a revenue-based LTV showing the total amount a customer pays.
For example, someone who buys a ¥150 coffee at a convenience store every day would generate over ¥500,000 in revenue over 3,650 days.
If you want to see the profit remaining after costs, you need to multiply the revenue-based LTV by a profit margin or subtract costs separately.
With a coffee profit margin of 20%, that same customer's profit-based LTV would be roughly ¥110,000 — meaning the figures can differ substantially depending on whether you're measuring revenue or profit.
In business, LTV is commonly used when evaluating the balance between the cost of acquiring a new customer and the long-term revenue that customer is expected to generate.
Since conclusions can vary significantly depending on whether revenue-based or profit-based LTV is used, it's important to confirm which figure is being referenced before drawing conclusions.