How is lifetime value linked to churn?
Tightly. Expected customer lifespan is roughly one divided by the churn rate, so halving churn doubles the lifespan and therefore the lifetime value.
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LTV Growth Simulator
Simulate customer lifetime value using the churn-based model (expected lifespan = 1 / churn), and see how cutting churn or lifting margin grows LTV.
LTV = ARPU × gross margin% / monthly churn ; lifespan ≈ 1 / churn
Frequently asked questions
Why use 1 divided by churn for lifespan?
Because if a fixed fraction leaves each month, the average customer stays about that many months' reciprocal. A 4% monthly churn implies an average life of about 25 months.
Which lever grows LTV fastest?
Usually cutting churn, because of that reciprocal effect, small churn reductions can lengthen lifespan dramatically. Lifting ARPU or margin helps too, but more linearly.
Why multiply by gross margin?
Because lifetime value should be profit, not revenue. The margin converts the revenue a customer brings into the profit they actually generate.
How does LTV guide the business?
It caps what you can sensibly spend to acquire customers and signals whether the unit economics work. Rising LTV gives room to invest more in growth.