LTV represents the total revenue a business expects to earn from a customer throughout their entire relationship. It helps companies understand long-term profitability rather than focusing only on initial sales. LTV is calculated based on average purchase value, purchase frequency, and customer lifespan. A high LTV indicates strong customer retention and loyalty. Businesses use LTV to guide marketing budgets and compare against customer acquisition cost (CAC). Increasing LTV is achieved through upselling, cross-selling, and improving customer experience.
| Metric | Value |
|---|---|
| Average Purchase Value | ₹2,000 |
| Number of Purchases per Year | 5 |
| Customer Relationship Duration | 3 Years |
| LTV Formula | Average Purchase Value × Purchase Frequency × Customer Lifespan |
| Calculation | ₹2,000 × 5 × 3 |
| LTV (Lifetime Value) | ₹30,000 per customer |