"My executive team wants LTV in our monthly report. But there are like four different formulas online — how do I pick the right one?"

This is one of the most common questions we hear from EC operators. LTV (Customer Lifetime Value) is widely used as a metric, but at least five common calculation methods exist. Pick the wrong one, and your business decisions rest on a shaky foundation.

TL;DR

There are five common LTV calculation methods : Simple, Gross Margin, Cohort, LTV/CAC, and DCF. Choose by business stage and product

LTV alone cannot drive investment decisions . View it together with CAC, with LTV/CAC = 3:1 as a baseline

The three prerequisite metrics are AOV, RPS, and purchase frequency . Without stable measurement of these, LTV figures lack foundation

Why "five methods" matters

LTV looks deceptively simple.…