LTV
Aussi : LTV, CLV, CLTV, Customer Lifetime Value, Lifetime Value, Valeur vie client, Valeur a vie du client
Lifetime Value: the total revenue (or profit) a customer generates throughout their entire relationship with your business.
What it is
LTV (Lifetime Value), sometimes written CLV or CLTV (Customer Lifetime Value), is the total economic value a customer brings across the full duration of their relationship with a company. It aggregates every purchase, subscription renewal, or upsell, minus (in profit-based versions) the cost to serve that customer.
There are two common flavors:
- Revenue LTV: total revenue a customer generates. This matches the tooltip meaning.
- Margin (or profit) LTV: revenue adjusted for gross margin and cost to serve, which finance teams usually prefer.
Why it matters
LTV turns a customer from a single transaction into a long-term asset. It answers a strategic question: how much is a customer actually worth over time?
- It sets the ceiling on acquisition spend: you should not pay more to acquire a customer than they are worth.
- It exposes retention leverage: small changes in churn or repeat rate compound heavily.
- It aligns marketing, finance, and product on the same value metric.
How it is used in practice
The most-watched application is the LTV:CAC ratio, comparing lifetime value to Customer Acquisition Cost.
- LTV:CAC around 3:1 is a common healthy benchmark for subscription businesses.
- Below 1:1 means you lose money on every customer acquired.
- Very high (5:1+) may signal underinvestment in growth.
A simple recurring-revenue formula:
LTV = (ARPA x Gross Margin) / Churn Rate
where ARPA is average revenue per account and churn is the periodic cancellation rate.
A concrete worked example
A SaaS company observes:
- ARPA: $100 per month
- Gross margin: 80%
- Monthly churn: 5% (so average lifespan = 1 / 0.05 = 20 months)
Calculation:
- Monthly contribution = $100 x 0.80 = $80
- LTV = $80 / 0.05 = $1,600
If CAC is $400, then LTV:CAC = 1,600 / 400 = 4:1, which is strong and suggests room to scale acquisition.
Common pitfalls
- Mixing revenue and margin definitions across teams, making numbers non-comparable.
- Ignoring discount rates: future cash is worth less today, so mature models discount it.
- Assuming constant churn when it usually varies by cohort and tenure.
- Overfitting predictive LTV models on thin historical data.