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CLTV is a key indicator of the health of your subscription business. It reflects the expected value of a customer who subscribes to your service. In ChurnIQ, CLTV is calculated on the basis of recent MRR and churn dynamics.
In subscription services, growing CLTV is primarily a reflection of a falling churn rate. It can also be grown by encouraging subscribers to upgrade to higher value offers.
Measurement: Customer Lifetime Value = Average MRR per customer / churn rate*
*In this calculation of lifetime value, only customers with an MRR contribution of greater than 0 are considered.
CLTV is an important metric to track over time, as it captures the value that your subscribers attach to your service. The greater your CLTV, the higher the valuation that your subscribers give the experience of viewing your content.
You should also factor CLTV into any consideration of subscriber acquisition efforts. If your average CLTV is $120, and the acquisition cost of 100 new subscribers is estimated at approximately $5,000, then your gross margin for that acquisition campaign will be $7,000.
CLTV allows you to consider the value of further investment in campaigns, or content, in perspective.