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Metric: Customer Lifetime Value (LTV)

The Customer Lifetime Value chart displays an estimate of the total subscription value of an average customer.

You can view this metric at https://app.chartmogul.com/#charts/ltv.

How is it calculated?

ChartMogul estimates Customer Lifetime Value with the following calculation:

LTV = Average Revenue Per Customer (ARPA) / Customer Churn Rate

For example, if your ARPA is $100 and your monthly customer churn rate is 5%, your LTV will be $2000.

Your LTV may sometimes be zero because your customer churn rate is zero.

In some scenarios, estimating LTV may not be so useful. For businesses with a small number of customers, the estimated value is likely to fluctuate from month to month due to the small sample size.

What analysis can be gained?

LTV can be useful when determining how much to spend on customer acquisition. For example, if your LTV is $100 and it costs $50 you to acquire a customer (CAC), this would result in a $50 gain (not excluding any other business costs).

LTV can also be useful when comparing groups of customers to see which group provides the greatest return on investment. For example, if you spend $100 to acquire 10 customers with an LTV of $12 this would not be as great a return of investment as spending $50 to acquire 10 customers with an LTV of $10.

Further reading

Check out our Ultimate Guide to SaaS LTV.