What is customer lifetime value (LTV)?

Two ways to estimate it

The formula method. For a subscription with $40 monthly ARPU, 80% gross margin and 4% monthly churn: LTV = 40 × 0.8 ÷ 0.04 = $800. Quick, but it assumes churn never changes, which is rarely true.

The cohort method. Take everyone who first bought in a given month and add up the revenue they have generated since, divided by the number of people. Plot it by month since first purchase and you get an LTV curve: steep at first, then flattening. It uses what actually happened rather than an assumption.

Reading an LTV curve

• Where it flattens tells you how long a customer stays valuable.
• Newer cohorts above older ones means product or targeting is improving.
• By acquisition channel, it shows which channels bring customers who keep buying, not just customers who buy once.

LTV in TapCub

The commerce report has an LTV curve: cumulative revenue per user by first-purchase month, for all cohorts or each month separately. A second view groups users by acquisition date and acquisition source — channel, campaign and so on, with a 180-day window — so you can compare which channels bring the most valuable customers. Retention analysis can also overlay LTV on the retention grid.

Revenue comes from the orders built from your purchase event, converted to the base currency. LTV per person across devices requires identified mode.

Common mistakes

• Using revenue instead of margin when comparing with CAC.
• Trusting the formula for young products. With a few months of data, churn is not stable yet.
• One LTV for everyone. Averages hide that a few customers often bring most of the revenue.

Related guides: Revenue Tracking with Events and Startup Metrics by Stage. See also customer lifecycle metrics.