# Customer lifetime value: what is a customer worth over time?

> Customer lifetime value explained: the simple formula, the margin-based version, a heat-pump maintenance example and what Google Analytics can predict.

Updated on October 15, 2026 · https://app.pilotiko.com/en/glossary/customer-lifetime-value

Customer lifetime value (LTV or CLV) is the revenue, or better the gross margin, a customer brings a business over the whole relationship. A simple estimate multiplies the average purchase value by purchases per year and by the number of years the customer stays. It is usually read side by side with acquisition cost.

## In short
- Simple formula: average purchase × purchases per year × years retained.
- More useful version: apply your gross margin to that result.
- Compare it with customer acquisition cost to judge a channel.
- Google Analytics predictions need more data than most local businesses have.

## Why think in terms of lifetime value?

Lifetime here means the length of the business relationship. A homeowner who books a furnace tune-up every fall for eight years represents eight invoices, possible referrals and maybe a replacement unit one day. Judging that customer on the first visit badly underestimates them.

That's why lifetime value is almost always read next to [customer acquisition cost](https://app.pilotiko.com/en/glossary/customer-acquisition-cost), which Quebec's language office calls coût de conversion du client [3]. One tells you what a customer costs to win; the other tells you what they bring in.

## Which calculation methods are there?

| Method | Calculation | Strength | Weakness |
|---|---|---|---|
| Historical revenue | Sum of a customer's invoices to date | Easy with good records | Ignores the future and margin |
| Average formula | Average value × frequency × duration | Works with a few dozen customers | Relies on averages |
| Margin-based | Average formula × gross margin rate | Comparable directly to CAC | Requires knowing your costs |
| Predictive | Statistical model of behaviour | Projects future purchases | Needs a lot of data |

For a small service business, the margin-based average formula is almost always enough.

## How do you calculate lifetime value for a maintenance customer?

**Example: a heat-pump maintenance company in Saint-Jérôme**

- Average price of a maintenance visit : $180
- Visits per year (spring and fall) : 2
- Average relationship length : 6 years
- Lifetime revenue ($180 × 2 × 6) : $2,160
- Gross margin on maintenance : 40%
- Lifetime margin ($2,160 × 40%) : $864
- Cost to win this customer : $220
- **= Each loyal customer leaves about $864 in margin for $220 spent to win them, a ratio of roughly 3.9 to 1.**

## What does Google Analytics measure about lifetime value?

In Google Analytics 4, the User lifetime exploration shows how users behaved and what they were worth over their lifetime as customers, for example which source, medium or campaign brought in users with the highest lifetime revenue. Lifetime data covers only users active after August 15, 2020 [1].

GA4's predictive metrics include predicted revenue over the next 28 days for users active in the last 28. To train its models, Google requires at least 1,000 returning users who triggered the condition, such as a purchase, and 1,000 who didn't, over a seven-day period within the last 28 days [2]. Few local service businesses reach that volume, so a manual calculation remains the realistic option.

## Which mistakes inflate or deflate lifetime value?

- Using your best customers' tenure as the average for everyone.
- Calculating on revenue instead of margin, then comparing it with a cost.
- Leaving out lost customers: average tenure has to include those who never came back.
- Mixing recurring maintenance clients and one-off renovation jobs in a single average.
- Keeping no per-customer history in a [CRM](https://app.pilotiko.com/en/glossary/crm), which makes purchase frequency impossible to measure.

## How can you raise customer lifetime value?

There are only three levers: higher average purchase value, more frequent purchases or a longer relationship. For a service company, an annual maintenance plan pulls the last two at once. Timely reminders, a follow-up after the job and a clear [quote](https://app.pilotiko.com/en/glossary/quote) for the eventual replacement help too.

Then check whether it worked: the share of customers who come back is a [conversion rate](https://app.pilotiko.com/en/glossary/conversion-rate) in its own right, worth tracking every year.

## Does Pilotiko calculate customer lifetime value?

Pilotiko does not compute predictive lifetime value. Its internal reports track bookings and revenue, which gives you the raw material for a historical calculation, and [revenue](https://app.pilotiko.com/en/glossary/revenue) by period appears on the dashboard.

> Coming soon: a Google Analytics connection. It is not available yet.

## Frequently asked questions

### What is the customer lifetime value formula?

The simple version multiplies average purchase value by purchases per year and by years of relationship. Then multiply by your gross margin rate so you can compare it with a cost.

### Are LTV and CLV the same thing?

Yes. LTV stands for lifetime value and CLV for customer lifetime value; both describe what a customer is worth over the whole relationship.

### What LTV to CAC ratio should I aim for?

There's no universal target that fits every trade. What matters is that lifetime margin clearly exceeds what it costs to win the customer, with room for surprises.

### How do I estimate tenure if my business is new?

Use a cautious assumption, such as two or three years, and replace it with real data as soon as you have it. Always write the assumption next to the calculation.

### Can Google Analytics calculate my lifetime value?

GA4 offers a User lifetime exploration and predictive metrics, but predictions need at least 1,000 users in each group during the training window. For a small local company, a calculation from your billing history is usually more reliable.

## Sources

1. Aide Google Analytics, « [GA4] User lifetime », https://support.google.com/analytics/answer/9947257 (accessed on 2026-10-15)
2. Aide Google Analytics, « [GA4] Predictive metrics », https://support.google.com/analytics/answer/9846734 (accessed on 2026-10-15)
3. Office québécois de la langue française (Vitrine linguistique), « coût de conversion du client (GDT) », https://vitrinelinguistique.oqlf.gouv.qc.ca/fiche-gdt/fiche/26541620/cout-de-conversion-du-client (accessed on 2026-10-15)