What is Customer Lifetime Value (LTV)

What is Customer Lifetime Value (LTV)

Customer Lifetime Value (LTV) measures the total revenue a customer generates during their relationship with your business. It helps businesses understand the long-term value of clients beyond just individual transactions.

Upmind calculates Customer Lifetime Revenue (LTR), showing the total revenue from a customer. You can use this as a basis to estimate your LTV by accounting for costs like service delivery or applying your gross margin.

LTR vs LTV

• LTR (Customer Lifetime Revenue): Total revenue a customer generates during their lifetime.
• LTV (Customer Lifetime Value): Adjusts LTR by subtracting the cost of service delivery or applying gross margin.

Upmind emphasizes LTR in insights and reporting, providing clear figures for revenue attributed to each customer.

Importance of LTV/LTR

Understanding LTV helps set realistic customer acquisition budgets and guides strategic marketing investments. It reveals how much revenue can be expected from customers over time, supporting smarter growth decisions.

Example: If a customer’s LTV is $500 and acquisition cost is $200, you earn $300 per customer on average.

Where to find LTR in Upmind

You can view Lifetime Revenue in the Insights and Reports dashboard, where it’s calculated by aggregating customer transaction history over time, factoring in subscriptions, renewals, and payments.

How to calculate your own LTV

Upmind provides key metrics like customer revenue and churn data, which you can combine with your own cost or margin inputs to estimate LTV. Rather than calculations within the platform, you adjust LTR figures externally based on your business specifics, such as gross margin rates.

• Churn Rate: Measures customers lost over a period. You can also calculate churn monthly or weekly and multiply accordingly.
• Average Revenue Per User (ARPU): This is the average yearly spend per customer, calculated by dividing total cash received by the number of customers, including discounts rather than using ARR.

Using gross margin for LTV

Since Upmind doesn’t track your expenses, incorporating a typical gross margin (often around 40%) is recommended to convert LTR to LTV. Work with your finance team if needed to refine this figure for accuracy.