Lifetime Value (LTV)

What is Lifetime Value (LTV)?

Lifetime Value (LTV) is a critical metric for businesses that measures the total amount of revenue a customer is expected to generate over their lifetime. It is an indicator of a company's financial health and is a key factor in determining customer acquisition and retention strategies.

To calculate LTV, you need to estimate the average customer lifespan and multiply it by the average revenue per customer per unit of time. For example, if a customer spends $100 per month and is expected to stay with the company for three years, their LTV is $3600.

By understanding a customer's LTV, businesses can determine the amount of money they are willing to spend on customer acquisition and retention efforts. This helps companies to allocate resources more effectively, optimize their marketing campaigns, and increase revenue over the long term.

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