Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV or CLV) is the total revenue a business expects to earn from a single customer over the entire span of their relationship. For subscriptions, a simple estimate is the average subscription price divided by the churn rate.
Customer Lifetime Value (LTV) tells you how much each subscriber is really worth — and therefore how much you can afford to spend acquiring one. For subscription brands it’s the metric that turns churn and price into a single number you can grow.
The LTV formula for subscriptions
The simplest subscription LTV estimate combines price and churn: a lower churn rate means customers stay longer, so each one is worth more.
- Average customer lifetime (months) = 1 ÷ monthly churn rate
- LTV = average monthly subscription revenue × average customer lifetime
- Equivalently: LTV = monthly price ÷ monthly churn rate
Use the interactive ltv calculator on this page to model the numbers.
LTV:CAC — the ratio that matters
LTV is most useful next to Customer Acquisition Cost (CAC). The LTV:CAC ratio shows whether your unit economics work. A widely used benchmark is 3:1 — you earn three dollars of lifetime value for every dollar spent acquiring a customer. Below 1:1 you lose money on every customer; far above 3:1 you may be under-investing in growth.
How to increase LTV on Shopify
Because LTV = price ÷ churn, you raise it by lifting revenue per customer or cutting churn:
- Reduce involuntary churn with automated dunning (recovered payments extend lifetime directly).
- Increase average order value with bundles, upsells, and tiered subscriber discounts.
- Offer prepaid plans, which lock in months of revenue and reduce churn decisions.
- Add loyalty rewards so subscribers have a reason to stay.
Frequently asked questions
What is the difference between LTV and CLV?
None — LTV (lifetime value) and CLV (customer lifetime value) are two names for the same metric: the total revenue or profit expected from a customer over their entire relationship with your business.
What is a good LTV:CAC ratio?
A commonly cited target is 3:1 — three dollars of lifetime value for every dollar of acquisition cost. Below 1:1 is unprofitable; much higher than 3:1 can signal you are under-spending on growth.
How do you calculate LTV for a subscription business?
A simple estimate is LTV = average monthly subscription price ÷ monthly churn rate. For example, a $40/month plan with 5% monthly churn implies an average lifetime of 20 months and an LTV of about $800 (before costs).
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