Customer Lifetime Value (LTV)

Customer Lifetime Value (LTV)

Customer Lifetime Value (LTV) represents the total amount of money a customer is expected to generate for your business during their entire relationship. It's a crucial metric for determining how much you can afford to spend on customer acquisition and affiliate commissions.

Calculating LTV

Simple LTV Formula

LTV = Average Customer Lifespan × Average Revenue Per Customer

SaaS LTV Formula

LTV = (Average Revenue Per Customer / Churn Rate)

Example Calculations

Basic Example

• Average monthly revenue: $100
• Customer lifespan: 24 months
• LTV = $100 × 24 = $2,400

SaaS Example

• Monthly revenue per customer: $150
• Monthly churn rate: 5%
• LTV = $150 / 0.05 = $3,000

LTV in Affiliate Marketing

Optimizing Affiliate Commissions

• High LTV customers: Can afford higher affiliate commissions
• Quality over quantity: Focus on affiliates who bring high-LTV customers
• Lifetime commissions: Pay ongoing commissions based on LTV
• Segment-based rates: Different commissions for different customer types

Ready to optimize your affiliate program based on LTV? Use our tools:

• Commission Calculator: Model LTV-based commissions
• ROI Calculator: Calculate total program ROI