Customer lifetime value (LTV) is the total profit a customer brings in during their entire time with a business — not just their first purchase. LTV tells us: how much a guest is "worth", how much you can spend to attract them, and whether retention is worth the investment. For SMBs, LTV simply = (average value per purchase) × (average number of purchases) × (length of engagement). Zenify recorded a 37% increase in LTV for repeat purchases (approved).
TL;DR
- LTV = total profit the customer brings during the engagement period.
- Simple formula: purchase value × number of purchases × number of years.
- LTV decides how much you spend to attract customers.
- High LTV = sustainable growth, not dependent on advertising.
- Increase LTV: retention, upselling, after-sales care.
What is LTV
Customer Lifetime Value (LTV/CLV) measures the total value a customer brings from entry to exit.
Vì sao quan trọng:
Decision on customer acquisition spending: If your LTV is 1.5 million, don't spend 2 million on advertising for 1 customer.
Compare CAC: LTV should be 3-5 times higher than CAC for the business to be sustainable (see Cost of acquiring new customers).
Prioritize retention: High LTV means retention is worth the investment.
How to calculate LTV for SMBs
Simple formula:
LTV = Average value per purchase × Number of purchases in a year × Number of years of service
Retail example:
Average value per purchase: 300,000 VND.
Buy 6 times/year.
Average commitment of 2 years.
LTV = 300,000 × 6 × 2 = 3,600,000 VND
Advanced recipe (minus cost):
LTV = (Profit per purchase) × Number of purchases/year × Number of years
Use profits instead of revenue to know what customers are really worth.
Why LTV is important for growth
1. Know "how much a customer is worth"
Set prices for attraction costs — don't attract customers at a loss.
Marketing budget orientation.
2. Distinguish between good and bad customers
Customers who buy once and then leave vs. customers who buy regularly.
Invest in high LTV groups.
3. Retention is LTV leverage
Retain customers for another year → LTV increases significantly (see Customer retention).
Increase purchase frequency → LTV increases without new revenue costs.
How to increase LTV for SMBs
1. Increase purchasing frequency
After-sale care suggests cyclical repurchases (see After-sale care messages).
Loyalty program encourages return visits (see Loyalty program).
2. Increase the value of each purchase
Up-sell: suggest a higher version.
Cross-sell: suitable complementary products.
3. Extend attachment time
Reduce churn with a stable experience (see Customer churn).
Ask customers who are "about to leave" to keep up (see Churn prediction AI).
4. Group channels to avoid losing customers
Customers who ask about any channel get an answer — there is no dormant news (see Multi-channel unification).
General customer profile helps take care of customers' needs.