Customer Lifetime Value (CLV)
What is Customer Lifetime Value (CLV)?
LTV combines three inputs: average revenue per customer, gross margin, and average customer lifetime. The simplest formula is (ARPU × gross margin) / churn rate. In B2B SaaS where deals are bigger and churn is lower, LTV can run 5-10x ACV; in transactional B2C it might be 1-2x. The right way to think about LTV isn't as a static number but as a system of levers: raising ARPU (better pricing or expansion), lifting gross margin (better cost structure), and reducing churn (better retention) each multiply through to total LTV. The discipline that matters most is honest churn measurement — optimistic churn assumptions lead to overstated LTV and overspent CAC.
Why it matters
- Defines the maximum economically sane spend to acquire a customer — the absolute cap on CAC.
- Reveals the multiplier effect of small retention improvements — 5 points of net retention can double LTV.
- Aligns the team — every function (product, success, sales) has clear levers on the same number.
Use cases
- LTV/CAC test. The foundational SaaS unit-economics ratio; 3x healthy, 5x great.
- Pricing power analysis. Modeling how ARPU changes drive LTV at constant churn.
- Retention investment justification. Quantifying how a 2-point churn reduction lifts LTV.
How turgo helps
turgo tracks lifecycle revenue per customer cohort and reports realized LTV against acquisition-period CAC — the only honest way to see whether unit economics are working.
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