Calculating it
Multiply average ticket by visits per period by the number of periods a customer stays, then apply gross margin. A café with a $6 average ticket, 8 visits a month, an 18-month lifespan and 65% margin: 6 × 8 × 18 × 0.65 ≈ $561 in gross profit per retained regular.
Ignore discounted-cash-flow refinements at this scale. The inputs are estimates with wide error bars, and a more elaborate formula applied to rough numbers produces a precise-looking wrong answer.
What LTV is for
It sets two ceilings. The most you can rationally spend to acquire a customer, and the most a loyalty reward can cost before the program destroys value.
In the café example, a free drink costing $2 in ingredients against $561 of lifetime gross profit is trivially worth it — provided the reward actually causes visits that would not have happened. That condition is where most loyalty ROI claims quietly fall apart.
Where the estimate goes wrong
Lifespan is the weakest input and the one with the most leverage. Most businesses guess it optimistically, and since it multiplies straight through, an optimistic guess inflates LTV proportionally.
Averaging across all customers also hides the distribution. A handful of regulars usually account for a large share of profit; an average computed over everyone describes a customer who does not exist.