Report: Customer Lifetime Value (LTV)
The Customer Lifetime Value (LTV) report shows the estimated revenue you'll receive from an average subscriber over their lifetime. For SaaS businesses, LTV is a critical metric for evaluating the return on customer acquisition spend—as a rule of thumb, it should be at least three times your customer acquisition cost (CAC). Use this report to balance growth investment against long-term revenue potential.
If you're new to ChartMogul, get to know how reports work.
This metric is also known as Lifetime Value (LTV) — the two terms are interchangeable.
How to Use the Customer Lifetime Value Report
LTV is useful when comparing cohorts — groups of customers acquired in the same period — to see which cohort generates the highest ROI (return on investment) on customer acquisition spend.
Increasing average revenue per account (ARPA) and reducing customer churn both raise LTV. Keep a close eye on both metrics to improve it.
What to Know About This Report
- ChartMogul can only calculate LTV when your customer churn rate is greater than zero.
- LTV fluctuates more month by month for businesses with fewer paying customers — a smaller sample size means less stable averages.
How ChartMogul Calculates Customer Lifetime Value (LTV)
ChartMogul calculates Customer Lifetime Value using this formula:
- Numerator: Average Revenue Per Account for the report interval
- Denominator: Six-month trailing average of Customer Churn Rate (the average of the churn rates from the previous six months, excluding the current month)
For example, with an ARPA of $100 and a 5% six-month trailing average customer churn rate, LTV is $2,000.
How to Read the Report Data Table
The Report Data table for Customer Lifetime Value works differently from other reports. It breaks down into these columns:
- Average Revenue Per Account — The total MRR in the report interval divided by the number of subscribers in the interval. See Average Revenue Per Account.
- Customer Churn Rate (6/mo avg) — A six-month trailing average of Customer Churn Rate (the percentage of subscribers who canceled their last subscription) calculated for the report interval. This is the average of the churn rates from the previous six months, excluding the current month.
- Customer Lifetime Value — Average Revenue Per Account divided by Customer Churn Rate (6/mo avg).
- Change — The increase or decrease in Customer Lifetime Value from the previous report interval, shown as a percentage.
Next Steps
- Read about LTV in our SaaS metrics library.
- See how much MRR you retain month by month after a customer begins a subscription with Net MRR Retention.
- Use Average Sale Price as an early indicator of whether LTV is likely to increase or decrease.
- Segment this report by marketing channel, region or a custom attribute such as training program completion to see which subscribers have the highest LTV.