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LTV is a shorthand for the current or projected revenue or profit associated with a brand’s average customer or a particular segment of their audience.
LTV stands for “lifetime value,” and represents the total financial value associated with a customer or a group of customers. However, different brands can and do use the term in a couple of different ways: to predict how much profit or revenue customers will produce, or to calculate how much profit or revenue customers have produced to date. If, for instance, you were looking to determine predicted LTV for the average customer, the equation would look like the below.
LTV is a broad enough concept that some companies calculate it in multiple different ways (for instance, LTV to date in term of profit, or projected LTV in terms of revenue) to better understand the costs and impacts of their customer acquisition, retention, and monetization efforts, but the basic idea remains the same.
“It turns out that increasing audience retention did more to boost our average customer LTV than all our promotional campaigns put together.”