Customer Lifetime Value (LTV)
Date created: Mar 28, 2018 • Last updated: Feb 24, 2022
What is Customer Lifetime Value?
The Customer Lifetime Value (LTV) metric indicates the total revenue a business can reasonably expect from a single customer account. It considers a customer's revenue value and compares that number to the company's predicted customer lifespan. Businesses use this metric to identify their most valuable customer segments.
Alternate names: Lifetime ValueCustomer Lifetime Value Formula
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How to visualize Customer Lifetime Value?
In most cases, a summary chart is sufficient to visualize your Customer Lifetime Value. This chart displays the current value of your metric with an optional comparison to a previous time period.
Customer Lifetime Value visualization example
Summary Chart
Customer Lifetime Value
$1105.06
72.77
vs previous period
Summary Chart
Here's an example of how to visualize your current Customer Lifetime Value data in comparison to a previous time period or date range.More about Customer Lifetime Value
There are two methods for calculating LTV - with or without considering Gross Margin (GM) percentage. The formula includes GM% and is considered to be the more conservative method to report LTV.
Customer Lifetime Value (LTV) is one of the most important metrics to measure at any growing company. By measuring LTV in relation to Cost of Customer Acquisition (CAC), companies can measure how long it takes to recoup the investment required to earn a new customer, for example, the cost of sales and marketing.
LTV tells companies how much revenue they can expect one customer to generate over the course of the business relationship. The longer a customer continues to purchase from a company, the greater their lifetime value becomes.
Recommended resources related to Customer Lifetime Value
More about how to calculate LTV from this Hubspot articleContributor
