---
title: What is Lifetime value?
url: https://markin.ai/glossary/lifetime-value
category: Revenue and ARPU metrics
aliases: LTV, CLV, Customer lifetime value
---

# 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

- [ARPU](https://markin.ai/glossary/arpu), ARPU, average revenue per user, is total revenue in a period divided by the average number of active users in that period.
- [LTV:CAC ratio](https://markin.ai/glossary/ltv-cac-ratio), The LTV:CAC ratio divides expected customer lifetime value by fully loaded customer acquisition cost.
- [Churn rate](https://markin.ai/glossary/churn-rate), Churn rate is the share of customers, or of revenue, lost in a period.
- [Survival analysis](https://markin.ai/glossary/survival-analysis), Survival analysis models time until an event, handling customers who have not churned yet as censored rather than discarding them.

## Go deeper

- [ROI calculator](https://markin.ai/roi-calculator), Model LTV against your own base.
- [How to increase ARPU](https://markin.ai/blog/how-to-increase-arpu), The levers that compound into LTV.

Source: https://markin.ai/glossary/lifetime-value