LTV

The concept

LTV, lifetime value, measures how much a buyer is worth by adding everything up: the initial purchase, the upsells, the recurring billing renewals, and the purchases that follow.

It's the number that decides how much you can afford to pay for a customer. An operation that only looks at the first sale has a low ceiling for traffic investment. One that knows its own LTV can afford to pay more for acquisition and still stay profitable.

Approval and chargeback feed directly into this math: a customer who can't pay the renewal, or who disputes a charge, cuts the LTV short.

How it shows up in practice

You sell an online course to Americans and track each buyer from their first sign-up through monthly renewals. A new customer is expensive in advertising, but if they keep renewing the subscription for a while, that initial purchase becomes a relationship that yields much more. Everything that customer spends with you during the entire relationship is your LTV.

Knowing this number changes how you invest in traffic and acquisition. If you only know the price of the first sale, you're limited in what you can pay per customer. But if you know how much each customer is worth in total revenue, you can pay more for acquisition and still stay profitable, because the math worked out over the entire customer lifetime.