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Metrics & Analytics

Customer Lifetime Value (LTV)

The total revenue a customer generates over their entire relationship with your business.

Definition

Customer Lifetime Value (LTV or CLV) represents the total revenue you can expect from a single customer account over the duration of your relationship. For SaaS, this is typically calculated as Average Revenue Per Account (ARPA) multiplied by Average Customer Lifespan, or ARPA divided by monthly churn rate. LTV is one of the most important metrics for understanding unit economics.

Why It Matters

LTV determines how much you can afford to spend acquiring and retaining customers. It also helps you prioritize which customer segments deserve the most attention. From an email perspective, every good onboarding sequence, dunning email, and win-back campaign exists to increase LTV by improving retention and expansion revenue.

How It Works

The simplest SaaS LTV formula is ARPA divided by monthly churn rate. If your average customer pays $100/month and your monthly churn is 5%, LTV equals $100 / 0.05 = $2,000. More sophisticated models account for expansion revenue, contraction, and cohort-based retention curves. Track LTV by acquisition channel and customer segment to understand which sources bring your most valuable customers.

Best Practices

  • 1Calculate LTV by customer segment to identify your best-fit profiles
  • 2Use LTV to prioritize retention efforts on high-value accounts
  • 3Track LTV trends over time to measure impact of onboarding improvements
  • 4Compare LTV across acquisition channels to optimize marketing spend
  • 5Build email segments based on predicted LTV to personalize messaging
  • 6Focus expansion email efforts on customers with high LTV potential

Revenue-Based Segmentation

Sequenzy syncs subscription data from Stripe so you can segment by customer value and build email strategies that prioritize your highest LTV accounts.

Learn More

Frequently Asked Questions

There is no universal benchmark because LTV depends heavily on your pricing and market. What matters more is your LTV to CAC ratio. Most investors want to see LTV at least 3x your customer acquisition cost. If your ratio is below 3, either increase prices, improve retention, or reduce acquisition costs.

Email impacts LTV in three ways. First, onboarding emails improve activation and reduce early churn. Second, engagement emails keep users active and reduce overall churn. Third, upgrade and cross-sell emails drive expansion revenue. A strong email program can increase LTV by 20-50%.

For pure financial analysis, use gross-margin-adjusted LTV. For marketing and email strategy decisions, revenue-based LTV is fine because you are comparing relative values across segments, not making precise profitability calculations.