Customer lifetime value (CLTV) represents the total revenue a business can expect to earn from a single customer over the entire duration of their relationship. It is a critical metric for understanding how much value a customer provides, especially when compared to the cost of acquiring and retaining them.

CLTV is calculated by multiplying the average revenue per user (ARPU) by the customer lifespan (the average length of time a customer remains subscribed).

For example, if a customer spends $50 per month and stays subscribed for an average of 24 months, their CLTV would be $1,200. Understanding CLTV is essential for businesses to identify the balance between acquisition costs and revenue generated over time.

By improving CLTV, businesses can reduce churn because customers who see greater value in a product are more likely to stay subscribed long-term.