How to calculate customer lifetime value (LTV)
Lifetime value (LTV) is a crucial metric that measures the amount of revenue a company can expect from the average shopper across their customer lifespan. Factors that impact LTV include purchase frequency rate, purchase value, and average order value. When compared to customer acquisition cost and other marketing costs, LTV can help companies assess the health of their business and refine their approaches to customer acquisition, retention, and even product development.
At Recharge, lifetime value is calculated based on the past occurrences for customers who have already left the platform. Recharge’s LTV calculation breaks down to annual revenue per user / customer churn.