Customer lifetime value (abbreviated as LTV, CLV, or CLTV) is a calculation of how much money a customer has spent with a business. For eCommerce brands, it is a crucial metric that reflects the health of the business and informs decisions such as customer retention and customer acquisition, and it can be used as a basis to segment customers.
Customer lifetime value is one of the most important eCommerce metrics, but we see it miscalculated all the time: in short, customer lifetime value is the gross margin per customer over their lifetime with your brand.
LTV is often miscalculated as the total sales, or predicted sales value: these are the metrics lifetime revenue (LTR) and predicted revenue. Many companies rely on these miscalculations due to misunderstanding customer lifetime value, and they harm their brands in the process.
Here’s Daasity Dan for more on customer lifetime value:
Customer Lifetime Value Formula
For a deeper dive into customer lifetime value, head over here!