Startup Dictionary
LTV
Definition
Lifetime Value; a prediction of the net profit attributed to the entire future relationship with a customer.
Deep Dive
Lifetime Value (LTV), or Customer Lifetime Value (CLV), is a prediction of the net profit attributed to the entire future relationship with a customer. It represents the total revenue a business can expect to generate from a single customer over the course of their engagement. Calculating LTV is crucial for businesses as it helps them understand the long-term worth of their customer base, informing strategic decisions related to marketing spend, customer acquisition costs (CAC), product development, and customer retention efforts. A higher LTV indicates more profitable customer relationships.
Examples & Use Cases
- 1A SaaS company calculating the average subscription duration and monthly revenue per user to estimate LTV
- 2A telecommunications provider predicting the total revenue generated from a subscriber over their multi-year contract
- 3An e-commerce brand estimating the total purchase value from a loyal customer who makes repeat purchases over several years
Related Terms
CAC (Customer Acquisition Cost)Churn RateRetention Rate