Lifetime value
What is Lifetime Value (LTV)?
Lifetime value, often abbreviated as LTV (or CLV for customer lifetime value), is a metric that estimates how much revenue a business can expect to earn from an average customer over the entire course of their relationship with the brand. It gives insight into how valuable a customer is over time, not just at the moment of purchase. This makes it a crucial metric for understanding long-term profitability, especially when compared to customer acquisition cost (CAC).
One way to calculate LTV is to divide the average annual revenue per customer by the churn rate. The higher the LTV, the more valuable each customer is to your business, and the more you can justify spending on acquisition and retention.
Why does LTV matter, and how can you increase it?
A strong LTV means that customers are staying longer, spending more, and contributing more to your business’s growth over time. By focusing on increasing LTV, you can improve your margins, reduce pressure on acquisition, and build a more sustainable business model.
Here are some proven strategies to increase customer lifetime value:
Recent industry research shows that LTV is steadily growing across the eCommerce subscription space, reflecting a shift towards longer-term customer relationships and the rising importance of brand loyalty in digital commerce.
