Lifetime Value (LTV) metric

Lifetime Value metrics are essential for any business looking to understand the long-term value of their customers.

It's calculated using the formula:

LTV = Average Purchase Value * Average Purchase Frequency * Customer Lifespan

Imagine you run an e-commerce store.

Let's say the average purchase value is $50, and your customers make purchases twice a year.

If the average customer lifespan is 5 years, the LTV would be:

LTV = 50 * 2 * 5 = $500

This means each customer, on average, will bring in $500 over their lifetime.

With this information, you can decide how much you can spend on acquiring new customers and retaining existing ones.