Which description best defines LTV in the context of customer value?

• A. LTV approximates gross margin per customer over lifetime.
• B. LTV is the total revenue from a customer over their lifetime.
• C. LTV is the average purchase size per transaction.
• D. LTV is the current value of all customers in the database.

Answer: (C)

LTV measures the value a customer contributes over the entire relationship, typically focusing on profitability across that lifetime rather than a single transaction. It reflects how much net value a customer brings you over time, which helps determine how much to invest in acquiring and retaining them.

Among the descriptions, the one that best fits LTV is the idea of gross margin per customer over their lifetime. This captures the long-run profitability of the relationship. The total revenue description ignores costs and margins, the average purchase size description describes per-transaction amount (not lifetime value), and the current value of all customers describes a snapshot, not lifetime profitability.