LTV (often called Customer Lifetime Value – CLTV or CLV) is an attempt at predicting the amount of profit that can be expected over the entire relationship with a user.
The “lifetime” in this metric does not refer to the lifespan of a human, but rather the full length of time that a person interacts with a business.
For example, if people were only expected to visit a website twice, then their LTV would only be calculated based on what people spend on the site during two visits.
This is a great metric to use when calculating CPA, ROI, or ROAS. By using LTV instead of immediate revenue, you capture a more realistic return on your marketing efforts.
As LTV will always be higher than immediate revenue, using it in your campaign planning also means you are able to run ads at a higher CPA while still being profitable.
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