Lifetime Value (LTV) or Customer Lifetime Value (CLV)

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What is Customer Lifetime Value (CLV)?

Lifetime Value (LTV) or Customer Lifetime Value (CLTV) is the gross profit a customer delivers to your business in their lifetime. It’s the amount of revenue your business will make from a customer over their average lifetime as a customer.

 

How to Calculate Customer Lifetime Value (CLV)?

     CLTV = [Average Revenue Per User or Unit (ARPU) X Gross Margin] X Customer Lifetime

 

Customer Lifetime Value (CLV) Examples

Example:

Your average customer pays your business $50 per month (ARPU).

Therefore, your business CLTV is $720 or ($50 APRU – $10 service cost) X 18 customer lifetime.

Example:

Your average customer pays your business $25,000 per year (ARPU).

  • It costs your business $10,000 to deliver your product to the customer.
  • Your average customer lifetime is 4.5 years.

Therefore, your business CLTV is $67,500 or ($25,000 APRU – $10,000 service cost) X 4.5 customer lifetime.


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