Customer Lifetime Value (LTV)
Date created: Oct 12, 2022 • Last updated: Oct 12, 2022
What is Customer Lifetime Value?
The Customer Lifetime Value (LTV) metric indicates the total revenue a business can reasonably expect from a single customer account. It considers a customer's revenue value and compares that number to the company's predicted customer lifespan. Businesses use this metric to identify their most valuable customer segments.
Customer Lifetime Value Formula
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How to visualize Customer Lifetime Value?
In most cases, a summary chart is sufficient to visualize your Customer Lifetime Value. This chart displays the current value of your metric with an optional comparison to a previous time period.
Customer Lifetime Value visualization example
Summary Chart
Customer Lifetime Value
Chart
Measuring Customer Lifetime ValueMore about Customer Lifetime Value
There are two methods for calculating LTV - with or without considering Gross Margin (GM) percentage. The formula includes GM% and is considered to be the more conservative method to report LTV.
Customer Lifetime Value (LTV) is one of the most important metrics to measure at any growing company. By measuring LTV in relation to Cost of Customer Acquisition (CAC), companies can measure how long it takes to recoup the investment required to earn a new customer, for example, the cost of sales and marketing.
LTV tells companies how much revenue they can expect one customer to generate over the course of the business relationship. The longer a customer continues to purchase from a company, the greater their lifetime value becomes.
Recommended resources related to Customer Lifetime Value
More about how to calculate LTV from this Hubspot articleMetric Toolkit
Start tracking your Customer Lifetime Value data
Use Klipfolio PowerMetrics, our free analytics tool, to monitor your data.
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