The definition is short; the implications are not. Customer lifetime value (LTV, CLV, or CLTV depending on the spelling preference) is the metric that reframes almost every subscription business decision. Without it, growth spend looks irrational. With it, the entire model makes sense.
The plain-English definition
LTV is what one customer is worth to your business over the full time they stay with you. For a one-time-purchase store, that includes the first purchase plus any repeat orders. For a subscription business, it's the sum of every recurring charge from signup to cancellation, less any refunds, plus any one-time add-ons.
The math, for subscriptions, simplifies cleanly:
LTV = ARPU × Average subscriber lifespan (in months)
Or equivalently: LTV = ARPU ÷ Monthly Churn Rate.
If your average subscriber pays $30/month and stays 20 months on average, LTV is $600. If 5% of subscribers cancel each month, the average tenure is automatically 1 ÷ 0.05 = 20 months, so the two formulas give the same answer.
Why the definition matters
For a one-time-purchase store, the customer is profitable on order one or they're not. For a subscription store, the customer might be unprofitable on order one (you spent more to acquire than you collected) and still be very profitable over their full tenure. LTV is the metric that justifies that gap — and decides which acquisition channels are sustainable.
What LTV is not
- Not the same as first-order revenue. First-order revenue is what they paid you today. LTV is what they'll pay over time.
- Not the same as gross profit. Revenue LTV ignores fulfillment cost. Profit LTV (revenue × margin) is the version that matters for unit economics.
- Not a single fixed number. LTV varies by channel, plan, cohort, and behavior. Treat it as a distribution, not a constant.
- Not useful alone. LTV is meaningful only relative to CAC. The standard benchmark is LTV ≥ 3× CAC.
The three letters: LTV vs. CLV vs. CLTV
All the same concept. LTV is shortest and most common. CLV (customer lifetime value) is the long form. CLTV (sometimes used as "Customer LifeTime Value") is older. Use whichever fits your context; the math doesn't change.