It is the total financial value that the customer creates over the whole period of his interactions with the company. For example, in a gym business, customers are charged $200 per month and in a situation where customers go to the gym for an average of 2 years, the lifetime value of the customers will be $200 X 2 X 12 = $4800.

To define how much profit a customer brought during his lifetime to the company, advertising expenses and operational expenses spent to attract customers, or [[customer acquisition cost]], is deducted. It's an important metric as it costs less to keep existing customers than it does to acquire (See [[Customer Acquisition]]) new ones, so increasing the lifetime value of your existing customers will drive the company’s growth.