LTV (Customer Lifetime Value) is the total revenue a customer generates during their relationship with your business. Calculate it: LTV = (Average Purchase Value × Purchase Frequency × Customer Lifespan). Example: $50 avg purchase × 10 purchases/year × 3 years = $1,500 LTV. Healthy business: LTV should be 3x CAC (Customer Acquisition Cost). Increase LTV through upsells, retention, and reducing churn. SaaS LTV: Monthly Revenue × Gross Margin ÷ Churn Rate.
Key Customer Lifetime Value Takeaways
- LTV = Average Purchase × Frequency × Lifespan
- SaaS LTV = Monthly Revenue × Gross Margin ÷ Churn Rate
- Healthy LTV:CAC ratio is 3:1 (LTV should be 3x CAC)
- Increase LTV: Upsells, cross-sells, reduce churn, increase engagement
- Track LTV by customer segment to optimize marketing spend
- High LTV customers deserve more acquisition investment
Customer Lifetime Value Statistics
3:1
target LTV:CAC ratio
5-25%
revenue from upsells
5%
retention boost = 25-95% profit
6-7x
cost to acquire vs retain
Expert Tips
Segment LTV by cohort
Different customer segments have vastly different lifetime values
Focus on retention first
Reducing churn by 5% can increase profits 25-95%
Include upsell revenue
Expansion revenue can be 20-30% of total LTV for SaaS
Calculate by acquisition channel
Customers from different channels often have different LTVs
Recommended Tools & Resources
ChartMogul
Subscription analytics and LTV tracking