Lifetime Value (LTV)(LTV)
Quick definition
The total revenue you expect to generate from a customer throughout their entire relationship with your company.
Detailed explanation
Lifetime Value is possibly the most important metric for subscription-based businesses. It determines how much you can invest in customer acquisition while remaining profitable. LTV is calculated by multiplying your Average Revenue Per Account (ARPA) by your customer lifetime (1 / churn rate). A customer who pays €1,000 per month and stays an average of 24 months has an LTV of €24,000. LTV can be increased through: higher prices, upselling and cross-selling (expansion revenue), longer retention (lower churn), or lower cost to serve. The golden ratio is an LTV:CAC of at least 3:1, ideally 4:1 or higher. This means each customer generates at least 3x as much as it costs to acquire them.
Synonyms
Examples
A SaaS company with €500 ARPA, 3% monthly churn → Average lifetime = 33 months, LTV = €500 x 33 = €16,500. With CAC of €4,000 → LTV:CAC ratio of 4.1:1 (healthy)
Through a customer success program, churn drops from 3% to 2% → Lifetime increases to 50 months, LTV to €25,000 → LTV:CAC becomes 6.25:1 (excellent), providing room for more aggressive growth
When to use this?
Use LTV to determine how much you can spend on customer acquisition. Segment LTV by customer cohort, acquisition channel, and customer segment to find where the most value lies. Increase LTV by focusing on retention and expansion.
Match-day approach
Match-day helps you maximize LTV by attacking both sides. We implement customer success programs that reduce churn (longer lifetime), and sales plays for upselling and cross-selling (higher ARPA). We build LTV cohort analyses so you see exactly which customer segments are most valuable, and target acquisition accordingly. This creates a flywheel: better customers → higher LTV → more budget for acquisition → even better customers.
Related terms
Customer Acquisition Cost (CAC)(CAC)
The total costs you incur to acquire a new customer, including marketing and sales expenses.
Churn Rate
The percentage of customers who stop using your product or service within a specific period.
Expansion Revenue
Additional revenue from existing customers through upsells, cross-sells, or usage expansion.
Learn more
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