Which statement best describes how LTV is used in decision making?

• A. To Justify CAC and Marketing Investments and to Segment Customers.
• B. To Forecast Quarterly Revenue Across All Segments.
• C. To Compute Employee Bonuses.
• D. To Determine Tax Liabilities.

Answer: (A)

LTV, or lifetime value, estimates how much profit a customer will generate over their entire relationship with the business. Using LTV in decision making helps determine whether acquiring a customer is worth the cost and how to allocate marketing dollars effectively. If the lifetime value of customers in a segment exceeds the costs to acquire and serve them, it makes sense to invest more in that segment. LTV also supports segmentation by profitability: you can focus on the most valuable customers or channels, tailor pricing and retention efforts, and design strategies that maximize long-term profit. In short, LTV guides how much to invest in marketing and which customer groups to prioritize, rather than tasks like forecasting quarterly revenue across all segments or setting employee bonuses or tax decisions.