Customer Lifetime Value (LTV)

A vendor metric for the total gross profit a vendor expects to earn from one customer over the relationship.

LTV is calculated from gross margin, churn rate, and customer lifetime. Healthy SaaS businesses target LTV-to-CAC ratios of at least 3:1. Buyer-side use: vendors with very high LTV-to-CAC ratios usually have strong moats and stable pricing; vendors with weak ratios may try to grow LTV through tactics that show up as friction at renewal time.