Conversion Optimisation
Lifetime Value (LTV)
Also known as: LTV & Lifetime Value
Plain English
How much a customer is worth over time.
Definition
Lifetime Value (LTV) is the total revenue a customer is expected to generate over the entire duration of their relationship with a product or business.
In practice
Used to understand customer value and inform decisions around glossaryAcquisitionAcquisition is the process of attracting new users or customers to a product, service, or platform.Open glossary term, glossaryRetentionRetention measures how well a product keeps users over time by continuing to deliver value. It is a key indicator of product success and long-term viability.Open glossary term, and pricing.
In context
It is a forecast presented as a fact. Early-stage figures are extrapolations from a few months of glossaryDataData is raw, uninterpreted information collected and stored so it can be analysed, processed, or used to inform decisions. On its own it carries no meaning; context and interpretation are what make it useful.Open glossary term, and they are usually optimistic.
The reality
LTV is often estimated, not exact - but it’s critical for understanding long-term value.
Compared with
Lifetime Value vs Average Order Value
AOV is what a customer spends per transaction, a snapshot. LTV is the total across the relationship and depends on glossaryRetentionRetention measures how well a product keeps users over time by continuing to deliver value. It is a key indicator of product success and long-term viability.Open glossary term. A high AOV with poor retention produces a disappointing LTV.
FAQ
Common questions
A few practical answers to the questions that usually come up around this term.
What is lifetime value?
LTV is the total revenue a customer generates over their relationship with a business.
Why is LTV important?
It helps determine how much you can spend to acquire customers.
How do you calculate LTV?
By combining average revenue per user with customer lifespan.
How do you increase LTV?
By improving glossaryRetentionRetention measures how well a product keeps users over time by continuing to deliver value. It is a key indicator of product success and long-term viability.Open glossary term, upselling, and customer experience.
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