The Lifetime Value (LTV) is a performance indicator used in marketing and business management. It measures the average financial value that a customer represents for the company over the entire duration of their relationship.
To calculate the LTV, it is necessary to know the average amount that each customer spends in each period (typically each month) and the average duration of the customer’s relationship with the company. The LTV is then equal to the average amount spent per customer per period multiplied by the number of periods of the customer’s relationship with the company.
The LTV is an important indicator for businesses as it allows them to understand the long-term value of their customers and better target their marketing and sales efforts. It is also useful for evaluating the profitability of customer retention efforts and determining marketing budgets to allocate for acquiring new customers.