Customer Lifetime Value (LTV) shows how much revenue a single customer will generate over their entire relationship with your product—from signup to subscription cancellation. It’s not just one payment; it’s the total cash flow from that user over time.
Why is LTV important for subscription apps?
For subscription apps, knowing true customer value beyond the initial fee is critical: retaining existing users is cheaper than acquiring new ones. A high LTV signals that customers find ongoing value in your service, ensuring steady revenue and enabling reinvestment in growth.
What metrics do you need for LTV?
- ARPU (Average Revenue Per User) = Total Revenue / Number of Users
- Customer Lifetime = 1 / Churn Rate
- Churn Rate = Customers Lost / Starting Customers
- CAC (Customer Acquisition Cost) — cost to acquire one customer
- Discount Rate — to account for time value of money
Simple method
LTV = ARPU × Customer Lifetime
Example: 100 new users, 20 churned, revenue $20 000
- ARPU = $20 000 / 100 = $200
- Churn = 20/100 = 0.2 → Lifetime = 1/0.2 = 5 months
- LTV = $200 × 5 = $1 000 (subtract CAC if desired)
Advanced method
LTV = Σₜ₌₁ⁿ [ARPU × (1–Churn)ᵗ⁻¹ / (1+Discount)ᵗ]
With a 0.5% monthly discount, this yields about $912 over 12 months.
Calculating LTV
App Store and Google Play, automatically gathering ARPU, retention, churn, and uses ML models to forecast LTV. You get ready-made dashboards and recommendations—no manual spreadsheets needed.
What is a good LTV for subscription apps?
- Games: LTV ≈ 4–6 months
- Basic subscription apps: ≥ 12 months
- Niche apps: ≥ 18 months
- At $10–$30/month subscription price, typical LTV ranges $50–$450
More on the LTV to CAC ratio
Aim for LTV / CAC ≥ 3:1.
Example: if LTV = $300, CAC should be ≤ $100.
A 2:1 ratio is marginally acceptable but leaves little room for error.
Tips to increase customer lifetime value
- Enhance product via user feedback and A/B tests
- Optimize UX and support to reduce churn
- Implement upsell & cross-sell of relevant features
- Build loyalty with discounts for longer subscriptions and bonuses
- Use analytics to identify churn points and boost value
Conclusion
LTV is the north star for subscription businesses. It guides investments in product, marketing, and support. By growing LTV and maintaining an LTV/CAC ratio of at least 3:1, you’ll build a sustainable, scalable service.
