Lifetime value
Also called: Customer lifetime value (CLV)
The term lifetime value (LTV) is a marketing term that refers to the expected net value from a customer relationship. This term is therefore known in the marketing world as customer lifetime value (CLV). This forecasting model takes into account a specific customer 's initial purchase but also the repeat purchases that follow. When calculating customer lifetime value, several factors can be taken into account and the (expected) period of time that a customer will use an organization's offerings is taken into account.
The simplest LTV calculation looks like this:
LTV = the average profit per order x average number of purchases per customer
Lifetime value is a monetary value of a customer relationship based on the present value of the expected cash flows from this relationship. The main objective of mapping this "customer lifetime value" is to gain insight into how much financial room there is to make investments. This numerical underpinning can therefore be seen as an important key performance indicator.
