Lifetime Value is the revenue that a business receives from a customer over time before he churns.
Why use it
This KPI shows you how much you can spend on acquiring and holding a customer. You can also cluster your customers by acquisition channel to find out how much to spend on which ones.
Note: A calculation by inverting the monthly churn rate can only give a rough estimate of customer lifetime as the churn rate varies over time. Especially, if your business is still young and did not go through a whole customer life cycle, customer lifetime can be hard to calculate.
|÷ Churn Rate (in % of users)|
|Alias||Customer Lifetime Value|
A company has a monthly churn rate of 5% per month and an ARPU of 50 €.