Math behind Customer Lifetime Value

Deriving the formula

Kirill Tsyganov
Apr 11, 2020 · 7 min read

When you conduct a bottom-up analysis of a business with customers there is one metric you definitely need to know — Customer Lifetime Value (LTV), i.e. how much profit a customer brings in over a whole period of economic relationship.

LTV is a very popular topic of business discussion and you will find a lot of different formulas to calculate it if you google it, but I will dive into plain mathematical aspect of this concept, which is not so well represented over the internet.