Customer Lifetime Value (LTV)
Lifetime Value (LTV) measures how much a customer will pay for our service over time.
Overview
Lifetime Value (LTV) measures how much a customer will pay for our service over time.”
What is Lifetime Vlaye?
Lifetime Value (LTV) measures how much a customer will pay for our service over time. You can calculate how much revenue a typical customer will generate with LTV.
How to Calculate LTV
To calculate LTV, multiply your average annual profit per customer by the average lifetime of a customer.
LTV Formula
LTV = Average Annual Profit Per Customer * Averate Lifetime of a Customer
Related Content: CAC (Customer Acquisition Cost)
Why CAC and LTV are important?
You can check the profitability of your product by considering the LTV:CAC ratio. It is ideal when the LTV is greater than the CAC, which means that the revenue you generate from a customer is greater than the cost of acquiring the customer. Therefore, you can still profit with a higher LTV even with a high CAC. On the other hand, if you have a low LTV, you might have low profitability even with a low CAC.