Gross LTV (Customer Lifetime Value)#
Total expected revenue from a customer before any cost deductions.
Important
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What it is#
Gross LTV is the total revenue a customer is expected to generate over their lifetime, before subtracting any cost of serving them. It is the top-line view of customer value — “how much will this customer pay us in total?”, not “how much profit do we keep?”.
Formula#
where ARPU is average revenue per user per period and customer lifetime is the average time a customer stays — commonly estimated as \(1/\text{churn rate}\).
Worked example#
With ARPU = $50/month and 5% monthly churn, the expected lifetime is \(1/0.05 = 20\) months, so
Each customer pays about $1,000 in total revenue over their average lifetime.
Gross vs Net LTV#
Gross LTV counts revenue only; Net (Contribution) LTV multiplies it by gross margin to get profit, e.g. at 70% margin \(1{,}000 \times 0.7 = 700\). Gross LTV is the optimistic number; Net LTV is the one to compare against CAC.
When it’s used (and its limits)#
Gross LTV gives a quick, high-level read and is handy for early-stage companies that lack detailed cost data. Two caveats matter:
It ignores cost of goods sold, so it overstates true value — finance teams prefer Net LTV.
The \(1/\text{churn}\) lifetime assumes a constant churn rate; real retention curves flatten over time, so survival analysis or cohort retention curves give a more accurate lifetime.
Theme: Business & Growth Analytics · All terminology
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Mind map — connected ideas
Net LTV (sometimes called Contribution LTV) · Revenue per User (RPU / ARPU) · Churn · Retention · Predictive LTV (pLTV)
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More in Business & Growth Analytics
Blended CAC (Customer Acquisition Cost) · CAC (Customer Acquisition Cost) · Cannibalization · Channel-Specific CAC (Customer Acquisition Cost) · Churn · Cohort · Cohort-Based LTV (Simple Version) · Conversion Rate (CR) · Cost-Per-Click (CPC) Models · Cross-Selling · CTR (Click-Through Rate) · Customer Lifetime · Customer Segmentation · D2C (Direct-to-Consumer)
See also
Source article Adapted (context, re-expressed) in our own words from: Gross LTV (Customer Lifetime Value) (insightful-data-lab.com).