Churn Based Lifetime Value

Estimate lifetime gross profit assuming constant monthly customer churn.

Description

Constant monthly churn implies a simple expected customer lifetime.

Constant monthly churn implies a simple expected customer lifetime. Multiplying that lifetime by monthly gross profit gives a simplified lifetime value.

Estimate lifetime gross profit assuming constant monthly customer churn.

When to use Churn Based Lifetime Value

Use this for the following task: Estimate lifetime gross profit assuming constant monthly customer churn.

Prepare the scenario values in one currency and consistent time periods. Use fractions for fraction fields and percentage points for percent fields.

How to use Churn Based Lifetime Value and understand its results

Prepare the scenario values in one currency and consistent time periods. Use fractions for fraction fields and percentage points for percent fields.
Enter monthlyArpu, grossMarginFraction, monthlyChurnFraction using the field table, then run the tool.
Read expectedLifetimeMonths, lifetimeGrossProfit. Interpret flags, units, ordering and placeholder values using the rules below.
Review any reported issue or failed check, correct the supplied values when appropriate, and verify the result in its intended context.

Input field	Meaning	Value type and bounds	Requirement
monthlyArpu	Monthly arpu	number	Required
grossMarginFraction	Gross margin fraction	number	Required
monthlyChurnFraction	Monthly churn fraction	number	Required

Use nonnegative monthly ARPU, margin in [0,1] and churn in (0,1]. Compute the lifetime and undiscounted gross profit.^[1]

lifetimeMonths=1/churn; lifetimeGrossProfit=ARPU×margin/churn

This summarizes the declared operation. Units, indexing, inclusivity and exceptional cases are explained in the surrounding text.

Output field	Meaning	Value type
expectedLifetimeMonths	Expected lifetime months	integer
lifetimeGrossProfit	Lifetime gross profit	number

json

{
  "input": {
    "monthlyArpu": 20,
    "grossMarginFraction": 0.5,
    "monthlyChurnFraction": 0.1
  },
  "output": {
    "expectedLifetimeMonths": 10,
    "lifetimeGrossProfit": 100
  }
}

Limitations and assumptions

No expansion, discounting, changing churn or cohort aging is modeled. Zero churn is rejected rather than assigned an infinite value.

These outputs describe the supplied scenario; accounting definitions, capitalization terms and time periods must match the intended use. Malformed requests produce input errors. A successfully evaluated request can still contain false flags, empty result lists or a result outside the supplied threshold; those outcomes have the meanings stated above.

Alternative or Complementary methods

Choose LTV CAC Range for this operation: Compare lifetime value to acquisition cost against a caller-defined target band. For a complementary task, use Gross Margin CAC Payback for this operation: Estimate customer acquisition payback months from monthly gross profit.

The implementation reference documents the exact calculation, supported input shapes and returned fields.

References

Churn Based Lifetime Value — tool.io

Similar or alternative tools

LTV CAC Range
Compare lifetime value to acquisition cost against a caller-defined target band.
Gross Margin CAC Payback
Estimate customer acquisition payback months from monthly gross profit.