Customer lifetime value (LTV)
Customer lifetime value (LTV) is the total net revenue a customer has paid you, averaged across customers. Compared with CAC it tells you how much you can afford to spend to acquire a customer, and split by channel it shows which channels bring customers worth the most.
Formula
LTV = sum(net revenue of all payments) / number of paying customersAdd the net revenue of every payment, after fees and refunds, and divide by the number of customers who have made at least one payment.
Worked example
| All-time net revenue | $36,000 |
|---|---|
| Paying customers | 300 |
- $36,000 / 300 = $120
Average LTV to date is $120 per customer.
How ProductLense shows it
ProductLense shows LTV on the Revenue page as all-time net revenue divided by paying customers, and LTV by channel so you can compare, for example, newsletter customers with Google Ads customers. It is a realised figure from payments already made, not a forecast from churn rates.
ProductLense needs a billing connection or the payment API for net revenue per customer, and identify calls so customers can be traced to the channel of their first visit for the per-channel split.
LTV: questions
- What is LTV?
- Customer lifetime value (LTV) is the total net revenue a customer has paid you, averaged across customers. Compared with CAC it tells you how much you can afford to spend to acquire a customer, and split by channel it shows which channels bring customers worth the most.
- How do you calculate LTV?
- Add the net revenue of every payment, after fees and refunds, and divide by the number of customers who have made at least one payment. For example, $36,000 of all-time net revenue across 300 paying customers is an LTV of $120.
- Where does ProductLense show LTV?
- ProductLense shows LTV on the Revenue page as all-time net revenue divided by paying customers, and LTV by channel so you can compare, for example, newsletter customers with Google Ads customers. It is a realised figure from payments already made, not a forecast from churn rates.
- What does ProductLense need to calculate LTV?
- ProductLense needs a billing connection or the payment API for net revenue per customer, and identify calls so customers can be traced to the channel of their first visit for the per-channel split.
- How is LTV different from MRR?
- MRR is recurring revenue in one month across all customers; LTV is revenue per customer over their whole history. MRR tells you the size of the business today, LTV what each customer has been worth. ProductLense’s LTV is realised to date, so young cohorts look smaller until they mature.
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