LTV (Customer Lifetime Value) is a business metric that estimates the total revenue a company can expect from a single customer throughout their relationship.

  • Formula (simple):

    LTV=AveragePurchaseValue×PurchaseFrequency×CustomerLifespanLTV = Average Purchase Value \times Purchase Frequency \times Customer Lifespan

  • Why it matters:
    • Helps determine how much to spend on customer acquisition (CAC).
    • Guides marketing, retention, and pricing strategies.
    • Focuses on long-term profitability rather than short-term sales.

👉 A higher LTV means customers bring more value over time, making retention strategies more important.