Discover the total value your customers bring to your business over their entire lifecycle. Calculate Customer Lifetime Value (LTV) to optimize your SaaS pricing, marketing spend, and growth strategy.
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The Customer Lifetime Value (LTV) Calculator is an essential tool for evaluating the long-term value of customers in subscription-based businesses. Understanding your customer LTV helps make informed decisions about acquisition and retention strategies.
Customer Lifetime Value (LTV) represents the total revenue a customer generates for your business throughout their entire relationship with your company. In subscription businesses, LTV is particularly crucial as customers pay recurring fees for service usage.
The formula for calculating LTV is:
LTV = (ARPU × Gross Margin) ÷ Churn RateWhere:
ARPU
(Average Revenue Per User) is the average revenue generated per customerGross Margin
is the percentage of profit generated from ARPUChurn Rate
is the rate at which customers cancel their subscriptionConsider a business with the following metrics:
Applying the LTV formula:
LTV = (10 × 0.8) ÷ 0.05 = 8 ÷ 0.05 = $160In this example, the customer lifetime value is $160. This means that, on average, each customer will generate $160 in revenue during their subscription period, allowing you to spend more on acquisition compared to the first month's payment alone.
Simply input your required data (ARPU, Gross Margin, and Churn Rate) and the calculator will provide your company's LTV. These insights will help you understand your customer value and make more informed decisions about your marketing and retention strategies.