What is Lifetime Value (LTV)?

Lifetime Value (LTV), also known as Customer Lifetime Value (CLV), is the total revenue a business expects to earn from a customer throughout their entire relationship. It considers purchase frequency, average order value, and customer lifespan.

When to calculate Lifetime Value?

LTV should be calculated when planning customer acquisition strategies, setting marketing budgets, evaluating customer segments, making product pricing decisions, or determining acceptable customer acquisition costs.

When might LTV calculations be inaccurate?

LTV calculations can be unreliable for new businesses without historical data, during periods of rapid change, for highly seasonal businesses, or when customer behavior patterns are inconsistent or unpredictable.

What is the importance of Lifetime Value in Analytics?

LTV helps optimize marketing spend, guides customer segmentation strategies, enables profitability analysis, supports pricing decisions, and provides a framework for making data-driven customer investment decisions.