Lifetime Value (LTV)
Definition: Lifetime Value (LTV), also known as Customer Lifetime Value (CLV), is a metric used to estimate the total revenue or profit a business can expect to earn from a customer throughout their entire relationship with the company. This value helps businesses understand the long-term worth of acquiring and retaining customers, guiding decisions on marketing strategies, customer service, and product development. LTV is calculated by analyzing various factors, including purchase frequency, average transaction value, and customer retention rates.
Example: If a customer typically spends $100 per month and remains loyal for 3 years, their LTV would be $3,600 ($100 x 12 months x 3 years).
