Lifetime Value (LTV)

Lifetime Value (LTV) estimates the total revenue a company can expect from a single customer account over the duration of their relationship. In SaaS, calculating LTV involves analyzing average revenue per user (ARPU) and customer lifespan, providing insights into customer profitability.

A high LTV indicates that customers are generating significant value over time, which can justify higher customer acquisition costs. Understanding LTV helps companies allocate marketing resources effectively, develop customer retention strategies, and forecast future revenues.