ustomer Lifetime Value (LTV) is a metric that predicts the profit of an entire relationship with a client. Instead of focusing on the profit for the first sale, we try to estimate the profit for all sales we will make to that customer. Hence, we focus the company on long term relationships rather than short term profits, in other words, we incentivise innovation, better products and better customer service. Not bad for a single metric 🙂
It’s surprising how often this is overlooked, and we’re fascinated by statistically impressive models that are modeling (and hence optimizing) for the wrong business behavior.