Why Marketing Feels Expensive Until You Understand Lifetime Value

Dec 30, 07:23AM

The “Marketing Is Too Expensive” Mindset

For many businesses, especially early-stage or small ones, marketing feels like money disappearing into a black hole. Ad dashboards show ₹500–₹1,000 per lead, and when that is compared only to the price of a single product or one-time sale, the entire exercise looks wasteful. The real problem isn’t always the cost itself, but the lens used to judge it. Most teams measure marketing on a per-transaction basis instead of a per-customer relationship. The moment Lifetime Value (LTV) enters the conversation, the same spend starts to look less like an expense and more like long-term asset building.

Why Marketing Feels Expensive at First

When businesses look at campaigns in isolation, a few patterns show up:

·         A lead at ₹500–₹1,000 feels “too high” if the product itself is only ₹1,000–₹1,500.

·         Ads are compared directly to product price: “If I spend ₹20,000 on ads, I must earn ₹20,000 back immediately.”

·         There is pressure for instant sales, same-week ROI, and quarter-on-quarter justification.

·         Little mental space is given to repeat buying cycles, referrals, or upsells.

Viewed this way, the reaction is logical but incomplete. It treats every buyer as a one-time transaction rather than a relationship that can compound in value.

 

What Is Customer Lifetime Value (LTV)?

Customer Lifetime Value is the total revenue a customer is expected to generate for your business over the entire length of their relationship not just on their first purchase. It includes:

·         Initial purchase.

·         Repeat purchases or renewals.

·         Upgrades and cross-sells.

·         Referrals that bring new paying customers.

Simple Example

·         Product price: ₹1,000.

·         The same customer buys 5 times over 2 years.

·         Basic LTV (ignoring referrals) = ₹1,000 × 5 = ₹5,000.

If that customer also refers a friend who buys twice, the effective LTV is even higher.

 

The Core Misunderstanding: Cost Per Sale vs Value Per Customer

Most dashboards and discussions focus on:

·         Cost per click (CPC).

·         Cost per lead (CPL).

·         Cost per acquisition/sale (CPA).

But they ignore:

·         How many times that customer will buy again.

·         What percentage of customers stay for months or years.

·         How much extra revenue effective retention and upsell systems create.

 

When decisions are made only on “cost per transaction,” marketing always looks expensive and fragile. When viewed as “what am I paying to acquire a relationship that could be worth 5–10× over time,” the exact same numbers often look reasonable or even cheap.

How LTV Changes the Way Marketing Costs Look

Without LTV

·         You spend ₹1,000 to sell one unit of an ₹800 product.

·         On paper: “We lost ₹200. Ads are too costly. Stop the campaign.”

With LTV

·         You still spend ₹1,000 to acquire that customer.

·         But over time, that same customer:

·         Buys 4 more times at ₹800 = ₹3,200.

·         Maybe upgrades once at ₹1,500.

·         Now total customer value = ₹4,000–₹5,000.

Suddenly:

·         Spending ₹1,000 to acquire ₹4,000–₹5,000 in long-term value is a solid trade.

·         Marketing moves from “cost per sale” thinking to “investment per customer.”

This is why brands with strong retention and repeat usage are comfortable spending aggressively up front they know what a customer is really worth over time.

Why Big Brands Spend Aggressively on Marketing

Large and mature brands don’t see marketing as a one-shot gamble:

·         They understand their retention rates and churn.

·         They track repeat behavior across months or years.

·         They optimize onboarding, product experience, and loyalty programs.

·         They make decisions on unit economics at the lifetime level, not the first invoice.

Subscription products, SaaS companies, financial services, and even FMCG brands think in LTV terms: they’re willing to acquire a customer at a short-term loss because they know the long-term math will more than cover it. When smaller businesses copy only the spend without the systems that create LTV, it naturally feels reckless and expensive.