GLOSSARY
LTV (Lifetime Value)
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Lifetime Value (LTV) is the total revenue a customer is expected to generate over the entire relationship with your business. It helps you understand the long-term value of acquiring and retaining customers.
What is LTV?
LTV is the projected revenue a customer will bring in over their lifetime with your business.
Why it matters
Understanding LTV helps you make informed decisions on customer acquisition costs, retention strategies, and overall business growth.
Examples
- A subscription-based company calculates LTV by multiplying average monthly revenue per customer by the average customer lifespan.
- An e-commerce store uses LTV to determine how much they can spend on marketing to acquire a new customerably.
Related Concepts
- Customer Acquisition Cost (CAC): The cost to acquire a new customer, which should be lower than the LTV to ensure profitability.
- Churn Rate: The rate at which customers stop doing business with your company; a lower churn rate increases LTV.