Boost revenue with updated CLTV insights! Learn how to calculate, track, and grow customer value for smarter subscription strategies.
Overview
CLTV represents the total revenue expected from a customer throughout their engagement with your service. The metric now reflects historical revenue and considers all product types, including non-recurring offers.
The updated formula for CLTV in ChurnIQ is:
Lifetime Value = Lifetime revenue from churned customers / Churned customers
This calculation ensures a more comprehensive understanding of customer value by focusing on actual revenue generated from churned subscribers.
If your total revenue from 100 churned customers is $10,000, your CLTV is calculated as:
$10,000 / 100 = $100
This updated formula provides a more realistic view of customer value based on historical data.
How CLTV works
CLTV calculation reflects the realized value of a subscriber by measuring their actual revenue contribution before churning. This approach offers a more accurate picture of revenue retention and customer behavior.
Using your CLTV
CLTV remains a critical metric when paired with CAC (Cost of Acquisition) to evaluate the return on investment in customer acquisition strategies. Tracking the updated CLTV helps assess whether your marketing spend is effectively contributing to long-term revenue growth.
For example, if your CLTV is $100 and your CAC is $30, your customer acquisition efforts are yielding strong returns. A healthy benchmark is to maintain a CLTV:CAC ratio of at least 3:1.
Adjusting your CLTV
While the updated CLTV calculation focuses on historical data, confidence adjustments remain useful when anticipating market trends. For instance:
- Increase your CLTV if you predict improved subscriber retention due to new content releases or improved platform features.
- Decrease your CLTV if you anticipate higher churn due to content removals or competitive pressures.
Occasionally, seasonal dynamics might mean your recent churn rate was unusually high. In such circumstances you may want to adjust your CLTV x 1.15 to correct the spike in churn.
Alternatively, you may know that a popular series is coming to an end in the next month. In such cases you may want to adjust your CLTV x 0.85 or even less to correct for the coming spike in churn.