What is Customer Lifetime Value (LTV)? How is LTV calculated?

LTV is not revenue from a customer , it is net profit.

This is how LTV is calculated:

CR=Churn Rate

Customer Lifetime Span (LT)= 1/CR

CM=Contribution Margin

LTV=CM*LT

Lets see with an example:

LT=1/0.6=1.66 Year

LTV= INR 400*1.66= INR 664

Customer Acquisition Cost (CAC) should be less than I/3 rd of LTV and Customer shall be profitable in the next 12 months.

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