LTV
Lifetime Value
Revenue
The total revenue expected from a customer over the entire duration of their relationship with your business. Higher LTV indicates stronger customer relationships and product-market fit.
What is LTV?
Customer Lifetime Value (LTV or CLV) predicts the total revenue a customer will generate throughout their entire relationship with your business. It's one of the most important metrics for understanding the long-term value of your customer base.
Why LTV matters:
- Determines how much you can spend to acquire customers (CAC)
- Identifies your most valuable customer segments
- Guides product and service investment decisions
- Helps optimize marketing spend
Factors that increase LTV:
- Reducing churn rate
- Increasing average order value
- Expanding share of wallet through upsells
- Improving customer satisfaction
Formula
LTV = ARPU × Gross Margin × Customer Lifespan (or ARPU ÷ Churn Rate)
Example
If ARPU is $100/month and average customer lifespan is 24 months, LTV = $2,400.
Why LTV Matters
LTV helps you understand the true value of acquiring and retaining customers, informing your acquisition budget and retention investments.
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