Lifetime Value
CRM & RetentionAlso: LTV · Customer Lifetime Value · CLV · CLTV
Quick definition
Lifetime value is the total revenue a customer generates over their full relationship with you. Calculated as average revenue per customer multiplied by their average lifetime, often expressed as gross LTV or net (after cost of goods) LTV.
Gross LTV before cost of goods, support, payment fees. Net LTV is usually meaningfully lower. Pair with CAC for the ratio that matters.
How it varies across Australia
LTV varies more than CAC across the Australian market because it depends on industry retention dynamics, pricing model and customer cohort quality. Subscription businesses with strong retention pull LTV well above transactional peers.
See retention shape across Australian industries →What it actually means
LTV is the most weaponised number in marketing. It's the lever that turns any CAC into a 'good investment' if you stretch the time horizon far enough. Twelve-month LTV and lifetime LTV are not the same number, and boards have been misled by the difference more times than anyone admits.
The honest version of LTV has three things attached: a time horizon, a cohort definition, and a confidence level. Twelve-month gross LTV on the Q2 cohort is a defensible number. 'LTV' on its own is rhetoric.
For most Australian businesses outside SaaS, LTV is best calculated on a 12-month or 24-month basis with explicit acknowledgment that anything beyond that is projection, not measurement.
LTV without a time horizon is a story, not a number.
How to calculate it
LTV = Average revenue per customer × Average customer lifetime
Worked example. Your average customer pays $120/month and stays for 18 months. Gross LTV = $120 × 18 = $2,160. Net LTV after gross margin and support costs will likely be 40-60% of that.
The Australian context
Australian businesses with subscription revenue often miss that domestic consumer behaviour around recurring billing differs from US patterns. Australian subscribers cancel less proactively but churn harder during macro shocks (rate rises, cost of living). Lifetimes calculated from a strong 24-month window can look very different from the next 12.
Where people get this wrong
Lifetime Value vs CAC
| Lifetime Value | CAC | |
|---|---|---|
| What it measures | Revenue from a customer over time | Cost to acquire a customer |
| Higher is | Generally better | Generally worse |
| Honest version requires | A time horizon | Including soft costs |
| Ratio between them | LTV ÷ CAC = unit economics | Same ratio, inverted view |
Related terms
Common questions
What's a healthy LTV:CAC ratio in Australia?
Three to one is the lazy benchmark. The honest answer depends on your industry, stage and pricing model. Higher is better but extreme ratios often mean you're under-investing in acquisition. Track the trend more than the absolute number.
Should I use gross or net LTV?
Net for unit economics decisions, planning and board reporting. Gross only for top-of-funnel discussions where you're trying to estimate revenue potential. Always label which one you're using.
How is LTV different from ARR?
ARR is an annual run-rate based on current contracted revenue. LTV is the total revenue a customer is expected to generate over their relationship. ARR is a snapshot. LTV is a projection.
Can LTV be negative?
Net LTV can be negative if a customer costs more to serve than they pay. This happens with poorly-priced freemium tiers and aggressive promotional acquisition. Gross LTV is positive by definition for any paying customer.
Keep exploring
About New Rebellion
New Rebellion is a marketing intelligence consultancy. We build tools, score Australian businesses on how their marketing actually performs, and publish Debrief every day. This dictionary is part of how we work in the open.
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