Glossary / Definition
Lifetime Value (LTV).
The total revenue a merchant expects to earn from a customer over the entire period of their relationship.
Lifetime Value (LTV) helps merchants understand the long-term value of customers acquired through affiliates. A higher LTV justifies higher acquisition costs and commission rates, making affiliate programs more attractive and competitive.
Affiliates who bring in customers with high LTV are particularly valuable to merchants and may receive preferential treatment, higher commissions, or exclusive promotional opportunities. Understanding LTV helps affiliates focus on quality customer acquisition.
LTV calculations consider factors such as average purchase value, purchase frequency, customer lifespan, and expansion revenue. In SaaS businesses, LTV is particularly important due to recurring revenue models and the potential for account expansion over time.
Related terms
- Affiliate An individual or company that promotes products for a merchant in exchange for a commission.
- Affiliate Marketing A performance-based marketing strategy where affiliates earn commissions by promoting a merchant's products or services.
- Affiliate Network A platform that connects merchants with affiliates to facilitate affiliate marketing partnerships.
- Affiliate Program A system where a merchant rewards affiliates for driving traffic or sales through their marketing efforts.
- Commission The fee paid to an affiliate for generating a specific action, like a sale or lead.
- Click-Through Rate (CTR) The percentage of people who click on an affiliate link compared to those who view it.
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