In context
Your DTC skincare brand has $55 AOV and a 3.2x repurchase rate over 18 months → LTV = $176. With 65% gross margin, contribution LTV = $114. You can safely spend up to $60-70 CAC on first purchase and still recoup within 9-12 months.
Why it matters
- LTV sets the absolute ceiling on profitable ad spend.
- Subscription / consumable products have higher LTV than one-shot purchases.
- Without LTV data, every CAC decision is guesswork.
Related terms
Frequently asked questions
How do I calculate LTV fast?
AOV × purchases per year × gross margin × expected customer lifespan in years. Start with 18-24 months if you don't have longer data.
Is 3x LTV/CAC healthy?
Yes — that's the classic SaaS rule and it holds for DTC with 12-month payback.
LTV includes returns?
It should. Net of refunds and returns is 'contribution LTV' — the only version worth planning against.