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Customer Lifetime Value (CLV) or Lifetime Value (LTV), Lifetime Customer Value (LCV)

In marketing, LTV (Lifetime Value), also known as Customer Lifetime Value (CLV), is a metric that predicts the total revenue a business can expect to receive from a single customer over their entire relationship with the company. LTV helps businesses understand the long-term value of their customers, guiding decisions on marketing strategies, customer acquisition costs, and strategies to improve customer retention and profitability. 

Why LTV is Important

Informed Marketing Strategies: LTV helps businesses understand which marketing campaigns attract the most valuable customers, allowing them to optimize their spending.

Profitability: By measuring the total revenue from a customer over their lifetime, businesses can more accurately assess long-term profitability.

Customer Acquisition Cost (CAC): LTV is used to evaluate the return on customer acquisition costs, ensuring that the cost to acquire a customer does not exceed their lifetime value.

https://www.thedigitalorbis.com/2025/10/cac-customer-acquisition-cost.html

Customer Retention: Understanding LTV highlights the importance of customer retention and can reveal insights into what keeps customers engaged and loyal.

How to Calculate LTV

There are several formulas to calculate LTV, with a common one being: 

LTV = Average Order Value × Purchase Frequency × Customer Lifespan 

Average Order Value: The average amount a customer spends per transaction.

Purchase Frequency: How often a customer makes a purchase within a given timeframe.

Customer Lifespan: The total duration of the customer's relationship with the business.

For businesses with a subscription model, a different formula may be used, focusing on monthly recurring revenue and churn rate: LTV = (Average Monthly Revenue per Customer × Gross Margin %) / Monthly Churn Rate

https://www.appsflyer.com/glossary/ltv/

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