Lifetime value modelling

Lifetime value (LTV)

Lifetime value is the total net benefit that a customer or group of customers will provide a company over their total relationship with a company.

An appreciation of lifetime value (LTV) is key to the theory and practice of customer relationship management. However, while the term is often used, calculation of LTV is not straightforward, so many organisations do not calculate it. Lifetime value is defined as the total net benefit that a customer, or group of customers, will provide a company over their total relationship with the company. Modelling is based on estimating the income and costs associated with each customer over a period of time and then calculating the net present value in current monetary terms using a discount rate value applied over the period.

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