Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV) is the total revenue a business expects to earn from a single customer over the entire relationship.
A common way to estimate LTV is to multiply the average revenue per customer per period by the average customer lifespan, often expressed as average monthly revenue divided by the monthly churn rate. For example, an average of 50 per month and a 5% monthly churn rate implies a lifespan of about 20 months and an LTV near 1,000. More detailed models also factor in gross margin.
LTV matters because it tells you how much a customer is really worth, which sets a ceiling on what you can sensibly spend to acquire and keep them. The LTV-to-CAC ratio is a standard gauge of business model health; a healthy SaaS often aims for an LTV several times its acquisition cost.
Because lifespan is the biggest lever in the LTV formula, retention drives lifetime value more than almost anything else. Continuously improving the product based on feedback gathered in Feedjolt keeps customers longer, expands their usage, and pushes LTV up.