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    Customer Lifetime Value (CLV / LTV)

    Customer Lifetime Value (CLV or LTV) is the total revenue (or gross profit) a business expects to earn from a customer over the entire relationship.

    CLV anchors economic decisions about acquisition spend, retention investment, and segment prioritization. The simplest version multiplies average revenue per user by gross margin and average lifespan; more sophisticated versions discount future cash flows and incorporate churn probability. CLV is highly sensitive to churn assumptions — a 1-point monthly churn change can swing CLV 20%+. Healthy SaaS businesses target a CLV:CAC ratio of 3:1 or better. CLV correlates strongly with NPS in long-cycle businesses: Bain research finds promoters have 2.5×-5× the lifetime value of detractors in subscription categories.

    Formula

    CLV = (Average Revenue × Gross Margin) / Monthly Churn Rate

    Example

    A SaaS with $80/mo ARPU, 80% gross margin, and 2.5% monthly churn: CLV = (80 × 0.80) / 0.025 = $2,560. If CAC is $640, CLV:CAC = 4:1.

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    Related terms

    Churn Rate

    Churn rate is the percentage of customers (or revenue) lost during a given period, typically reported monthly or annually.

    Net Promoter Score (NPS)

    Net Promoter Score (NPS) measures customer loyalty by asking how likely customers are to recommend a product or service on a 0-10 scale.

    Voice of Customer (VoC)

    Voice of Customer (VoC) is a systematic program for collecting, analyzing, and acting on customer feedback across every touchpoint and channel.

    Customer Journey Mapping

    Customer journey mapping is the practice of visualizing the end-to-end experience a customer has with a brand across stages, touchpoints, channels, and emotions.

    Customer Satisfaction (CSAT)

    Customer Satisfaction (CSAT) measures how satisfied customers are with a product, service, or interaction on a 1-5 or 1-10 scale.

    Customer Effort Score (CES)

    Customer Effort Score (CES) measures how much effort a customer expended to complete a specific interaction, typically on a 7-point agree/disagree scale.