Customer Lifetime Value (LTV)

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What it means

Total gross profit expected from a customer over their lifetime with you.

Why it matters

The other side of the CAC equation. Healthy LTV/CAC is 3+.

How to calculate — with Cawan's Shoes

LTV = ARPU × Gross Margin / Churn. Cawan's runner: $200/yr × 55% / 20% churn = $550.

What's at stake if you ignore this

Overpay for CAC and every acquired customer loses money.