Abbreviation: Lifetime Value
1. To a 5-year-old:
Imagine you have a piggy bank where you save all your birthday money and allowance. It keeps growing because you keep adding to it! LTV is like that piggy bank for companies, but instead of money, it shows how much “value” each customer brings them over time. The longer a customer stays with a company and keeps buying things, the bigger their LTV gets, just like your piggy bank!
2. To a layman:
Think of LTV as a company’s “best friend score.” It’s not just about selling a product once, it’s about building a long-term relationship with each customer. LTV measures how much money a customer is worth to a company over their entire “lifetime” as a customer. The more a customer buys, the longer they stay, the higher their LTV. It’s like understanding how much treasure your best friend brings into your life, not just the one toy they gave you last week.
3. To an expert:
LTV (Lifetime Value) is a crucial metric in customer relationship management (CRM) and marketing strategy. It estimates the total revenue a customer is expected to generate for a company throughout their relationship. Accurately calculating LTV involves factoring in purchase history, average order value, repeat purchase rates, and customer churn.