Lifetime value
Also called: LTV, CLV, Customer lifetime value
Lifetime value is the discounted margin a business expects from a customer over the whole relationship. It combines revenue per period, gross margin, expected tenure and a discount rate, which is why it is a forecast to be maintained rather than a fact to be reported.
How it is calculated
LTV = (ARPU x Gross margin) / Churn rate
The simple form assumes constant churn and no expansion. Prefer a survival-based estimate once cohorts differ materially.
Why it matters for ARPU
ARPU is this period; LTV is the same lever compounded over tenure. A retention win raises both, which is why churn work usually outranks acquisition work on value.
Related terms
ARPUARPU, average revenue per user, is total revenue in a period divided by the average number of active users in that period.LTV:CAC ratioThe LTV:CAC ratio divides expected customer lifetime value by fully loaded customer acquisition cost.Churn rateChurn rate is the share of customers, or of revenue, lost in a period.Survival analysisSurvival analysis models time until an event, handling customers who have not churned yet as censored rather than discarding them.