Lifetime Gross Profit (LTGP) is the total gross profit a business expects to earn from a single customer over the relationship, calculated as lifetime revenue multiplied by realized gross margin, and used as a stricter substitute for revenue-based lifetime value.
LTGP is calculated in two steps. Lifetime revenue equals average order value divided by one minus the repeat customer purchase rate, where the repeat rate is this month's orders from repeat customers divided by last month's total orders. LTGP then equals lifetime revenue multiplied by 📝Gross Margin. The margin used should be realized gross margin, with cost of goods sold loaded with fully landed product costs, fulfillment, merchant processing, inventory shrinkage, returns processing, discounting, and sell-through.
The distinction from 📝Lifetime Value (LTV) matters most where margins are thin or uneven. Two businesses with identical revenue per customer can have very different LTGP, and a revenue-based ratio of 3:1 at a 33% margin means acquisition spend is only just recovered. Comparing LTGP with 📝Customer Acquisition Cost (CAC) tests whether each customer truly repays what it cost to win, which makes it the stricter numerator for the 📝LTV:CAC ratio. The measure is most useful in consumer brands and direct-to-consumer commerce, where fulfillment, returns, and discounting can consume much of the revenue a customer generates.
I renamed LTV to LTGP at 📝Assembled Brands because there's no standard way to calculate lifetime value, and founders naturally present it in the best light. Putting gross profit in the name forces the margin question up front.