LIFETIME VALUE

Lifetime Value (LTV) is a prediction of the total revenue a business can expect from a single customer throughout the entire duration of their relationship.

Think of it as the grand total of what acustomer is worth to your business from their first purchase to their last

The LTV compares the total value generated by a new customer compared to the cost of acquiring it, also known as CAC (Customer Acquisition Cost).

In short: it's the maximum threshold to get new customers.

Why is it important to measure?

1. If you know how much revenue a customer will likely bring in, you will better allocate sales and marketing budgets or resources.
2. You will be able to optimize your acquisition journeys if you compare multiple paths.
3. You will know your most valuable customers and create strategies to keep them coming back, boosting profitability.
4. You will forecast future revenue more accurately; essential for planning growth strategies and investments.