The Lifetime Value of Customer (LTV) Formula is a tool that helps businesses calculate the total value of a customer over the course of their relationship. In simple terms, it’s a way to measure how much you can expect to earn from each customer over their lifetime. By understanding LTV, businesses can optimize their strategies for acquiring and retaining customers, as well as setting appropriate prices. For example, a business may decide to offer discounts or free products in the short term if they believe a customer’s lifetime value will be higher than the cost associated with acquisition. Ultimately, the formula helps companies make informed decisions based on reliable data.