When you work with Rakos Media, one of the first questions we ask is:

What’s your customer’s Lifetime Value?

It might feel like a finance question. But it’s not. It’s a marketing strategy question — and a growth strategy question. If you don’t know how much a customer is worth to your business over time, you can’t make smart decisions about how much to spend to acquire them.

Look, if we're running your ads and your LTV is $200 and the cost of acquiring a new customer from an ad is $250, then we won't take your money. Ads won't be profitable for you. We need to know that pretty early on in our engagement.

What Is Customer Lifetime Value (LTV)?

Customer Lifetime Value (LTV) is the total amount of money a customer is expected to spend on your business throughout their entire relationship with you. It’s not a single transaction — it’s the whole journey.

There are two ways to calculate it:

• Gross LTV: total revenue generated by a customer over time
• Net LTV: revenue minus the cost of goods sold (COGS) and fulfillment

Why Is LTV So Important?

Knowing your LTV transforms the way you look at marketing. If your average customer spends $200 over their lifetime, and you’re spending $250 to acquire them, you’re in trouble. You’re essentially buying revenue at a loss. But if your LTV is $800, and your cost per acquisition (CPA) is $150, you’ve got margin to work with. Now we can turn up the volume and scale with confidence.

Rakos Media always asks for LTV because it informs:

• How much you should be spending on ads
• What your return on ad spend (ROAS) should be
• How quickly you can expect to profit from new customers
• Whether your business is positioned to scale

Without this number, we’re flying blind — and that’s not how we do things.

Step-by-Step: How to Calculate Gross Lifetime Value

Here’s the formula:

Gross LTV = Average Order Value (AOV) × Purchase Frequency × Customer Lifespan

Let’s break each part down.

1. Average Order Value (AOV)

This is the average dollar amount a customer spends per transaction.

How to find it: Total Revenue ÷ Number of Orders

If you made $100,000 from 2,000 orders: $100,000 ÷ 2,000 = $50 AOV

2. Purchase Frequency

How often does a customer buy from you within a given period?

How to find it: Number of Orders ÷ Number of Customers

If you had 2,000 orders from 400 customers: 2,000 ÷ 400 = 5 purchases per year

3. Customer Lifespan

This is the average duration a customer continues buying from you.

In SaaS or subscription models, this is clear. In product-based businesses, you may need to estimate based on historical data.

Let’s say the average is 3 years.

Put it together:

$50 AOV × 5 Purchases/Year × 3 Years = $750 Gross LTV

Step-by-Step: How to Calculate Net Lifetime Value

Gross LTV is useful. But it doesn’t tell us how much you actually keep.

For that, we calculate Net LTV:

Net LTV = Gross LTV − Customer Acquisition Costs (CAC) − Fulfillment Costs

Start with your Gross LTV. Then subtract:

• Cost of Goods Sold (COGS)
• Customer Support or Fulfillment Costs
• Marketing or Retention Spend

Example:

• Gross LTV: $750
• COGS per order: $15
• Support, overhead, and marketing: $150
• CAC: $100

$750 − ($15 × 5 purchases) − $150 − $100 = $475 Net LTV

This tells us you make $475 in profit per customer over their lifetime.

Pro Tips for Getting More Accurate LTV

1. Segment your customers Not all customers are created equal. Your VIPs might spend 4x more than average. Track high-value segments separately.
2. Track churn For service businesses, especially subscription models, understanding when customers leave helps estimate true lifespan.
3. Factor in upsells and cross-sells Are customers buying accessories? Services? Add-ons? Include that in your average order value.
4. Use cohorts Track customers acquired in a certain month or campaign. How much did they spend over time? This is gold for ad attribution.
5. Don’t guess Use your actual data. Pull reports from Shopify, Stripe, QuickBooks, or your CRM to get the real numbers.

What LTV Tells Us at Rakos Media

We don’t run ads to "see what happens." We engineer your growth based on data.

When you tell us your Net and Gross LTV, we can:

• Set a target cost per lead or target cost per acquisition
• Adjust your offer to increase average order value
• Build email flows or retargeting strategies to extend lifespan
• Predict exactly how profitable each funnel will be
• Scale with confidence

Let’s say your Net LTV is $600. We know we can spend $200 to acquire a customer and still triple your investment.

That allows us to be aggressive, strategic, and clear in your growth path.

What If You Don’t Know Your LTV Yet?

That’s okay. Many business owners haven’t looked at it this way before. But now that you understand it, here’s how to get started.

Step-by-Step Recap:

1. Export your sales data for the last 12 months
2. Calculate average order value
3. Determine average purchase frequency
4. Estimate customer lifespan
5. Multiply to get Gross LTV
6. Subtract costs for Net LTV

If you need help crunching the numbers, our team can walk you through it.

We’re not just here to run your ads. We’re here to build your business.

Final Thoughts

LTV is one of the most powerful numbers in your business. In fact, we may not start your project until we know this number. It's a KPI for us in measuring success for your account.

It tells you:

• How much you can afford to spend
• How long it takes to profit
• What to change if you want to grow faster

At Rakos Media, we use this metric to build sustainable, scalable campaigns that don’t just get clicks — they generate long-term ROI. If you’re ready to grow smarter — not just louder — bring your LTV numbers, and we’ll bring the strategy. Need help calculating your LTV or optimizing your funnels? Reach out to the Rakos team. Let’s turn insight into impact.