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Performance

LTV (Lifetime Value)

Also known as: customer lifetime value · CLV · LTV

Definition

LTV is the total gross profit a business expects to earn from a customer across the entire relationship, after cost of goods but before acquisition cost.

LTV should be calculated on gross profit rather than revenue. A customer who spends AED 10,000 on a product with a 20% margin is worth AED 2,000, and treating them as a AED 10,000 customer will lead to acquisition budgets that quietly destroy the business.

Predicted LTV is a forecast, not a fact, and early-stage businesses routinely overstate it by extrapolating from their most loyal early cohort. The safer approach is to work with realised value at fixed windows — 90-day, 12-month — and only extend the horizon once you have cohorts old enough to prove it.

Formula

LTV = Average order value × Gross margin % × Purchase frequency × Customer lifespan

More in Performance

Attribution window

An attribution window is the period after an ad interaction during which a resulting conversion is credited to that ad — commonly 1, 7 or 28 days for clicks and 1 day for views.

CAC (Customer Acquisition Cost)

CAC is the total sales and marketing cost required to acquire one new paying customer over a given period, including media spend, agency fees, tooling and salaries.

Cohort analysis

Cohort analysis groups customers by a shared starting characteristic — usually acquisition month — and tracks their behaviour over time, revealing retention and value patterns that blended averages hide.

Consent mode

Consent mode is a mechanism that adjusts how analytics and advertising tags behave based on a user's consent choices, allowing modelled measurement when tracking consent is withheld.

Contribution margin

Contribution margin is revenue minus all variable costs — cost of goods, shipping, payment fees, returns and marketing — showing what each sale actually contributes toward fixed costs and profit.

Conversion rate

Conversion rate is the percentage of visitors or sessions that complete a defined action — a purchase, form submission or booking — within a measurement period.

All 87 terms
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