Skip to content

What is LTV?

Lifetime value: the gross profit a customer is expected to generate over their whole relationship.

The standard churn formulation is undiscounted, so it overstates present value at long lifetimes. Computed on revenue rather than gross profit it overstates by the whole margin.

LTV = ARPU × gross margin ÷ churn rate

Not to be confused with ARPU

ARPU is revenue per user in one period. LTV integrates it over the expected lifetime and applies the margin.

Where this is used