Lifetime Value (LTV) is a [[Product Metric]] used to measure the profitability of a customer over the lifetime of their relationship with a business. It is calculated by multiplying the average revenue per user ([[Average Revenue Per User (ARPU)]]) by the average length of customer relationship ([[Average Lifetime Customer Revenue (ALCR)]]). ## Lifetime Value (LTV) Formula & Calculation For example, if an average customer spends $50 per month and stays with the company for 2 years then their LTV would be calculated as follows: LTV = ARPU x ALCR = $50 x 24 months = $1,200. This metric is important to businesses because it helps them to identify how much they should be willing to spend on [[User Acquisition]], how much they should be investing in [[User Retention]], and how to optimize their pricing model in order to maximize profits.