SaaS Marketing
LTV (Customer Lifetime Value)
Quick definition
LTV (Customer Lifetime Value) is the total revenue a SaaS company expects to earn from a single customer over the entire relationship.
A common LTV formula: ARPU × Gross Margin ÷ Churn Rate. More sophisticated calculations include expansion revenue and time-discount the future cash flows.
Why LTV (Customer Lifetime Value) matters
LTV is the foundation for evaluating CAC, channel ROI, and pricing strategy. Higher LTV justifies higher acquisition spend and longer payback periods.
How LTV (Customer Lifetime Value) works in practice
Grow LTV by reducing churn, increasing expansion revenue (upsells, cross-sells, seat growth), and steadily improving pricing.
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Related terms
CAC (Customer Acquisition Cost)
CAC is the total sales and marketing spend required to acquire one paying customer.
Churn Rate
Churn rate is the percentage of customers (logo churn) or revenue (revenue churn) lost in a given period.
Net Revenue Retention
Net Revenue Retention (NRR) measures the percentage of recurring revenue retained from existing customers over a period, including expansion, contraction, and churn.