Customer lifetime value
LTV · An estimate of the total revenue or profit a customer will bring over their whole relationship with the business.
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Why it matters
A campaign that loses money on the first order can become profitable through repeat purchases. Lifetime value sets how much can be spent to win a customer, and it matters especially for businesses with subscriptions, repeat purchases or maintenance contracts. The way to raise it is often to keep satisfied customers.
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Example
A coffee subscription loses money per customer in the first month, but customers stay subscribed for 14 months on average. Taking lifetime value into account, the ad spend is profitable and the budget is raised with confidence.
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Common mistake
Calculating lifetime value with optimistic guesses. Without real retention and repeat-purchase data, the estimate can lead to overspending.
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Related terms
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