What is Customer Lifetime Value (LTV)?

• A. The average revenue per customer over a period
• B. The total revenue produced by all customers
• C. The average revenue generated per customer over a certain period
• D. The total marketing cost per customer

Answer: (C)

Customer Lifetime Value measures the revenue you expect to earn from a single customer over the duration of their relationship with your business. This concept helps you understand how valuable each customer is over time and guides decisions about how much to invest in acquiring and retaining customers. The best choice describes LTV as the average revenue generated per customer over a period, which aligns with thinking about how much value a typical customer contributes across their relationship with you. It isn’t the total revenue from all customers, nor the total marketing cost per customer, nor just revenue in a single period. In practice, LTV is often estimated by looking at how much revenue a typical customer brings in across their entire relationship, which supports budgeting for marketing and retention strategies.