Customer Lifetime Value (LTV)

What LTV means for subscription apps

Customer Lifetime Value (LTV, sometimes CLV) is the total revenue a single paying customer generates from first purchase until they churn. For a subscription app, the simplest LTV formula is:

LTV = ARPU / churn_rate

If monthly ARPU is $5 and monthly churn is 4%, LTV is $5 / 0.04 = $125 per customer.

LTV matters because it sets the ceiling on how much you can spend to acquire a user (CAC) while still running a profitable business. The standard heuristic is LTV:CAC of 3:1 or better.

How LTV interacts with localized pricing

This is where indie devs running global apps get caught. ARPU varies by country. Churn varies by country. So LTV varies by country, and the dynamics flip when you change pricing strategy.

Consider two pricing strategies for an Indian subscriber:

• FX auto-pricing. ₹1,660 monthly. Most users see it, decide it is too expensive, and never start a trial. The few that do convert have low churn because they self-selected as high-willingness-to-pay. ARPU is high in INR, churn is low, but the funnel is tiny.
• PPP-localized pricing. ₹499 monthly. Trial starts go up. Trial-to-paid conversion goes up. Churn rates more closely match US patterns. ARPU per user is lower in INR, but the number of users multiplies, and total LTV across the cohort grows.

Which wins depends on category and elasticity. RevenueCat's SOSA reports consistently show that localized pricing increases total revenue in lower-income markets, even though per-user ARPU drops in local currency terms.

How to calculate LTV (and where it breaks)

The simple formula above is fine for early-stage thinking. For a more accurate number:

• Use gross margin revenue, not gross revenue. Apple and Google take 15 to 30 percent off the top.
• Use cohort retention curves, not a single churn rate. Year-1 churn is much higher than steady-state churn.
• Segment by acquisition channel (paid vs organic) and plan tier (monthly vs annual).

Why does LTV matter for app pricing?

Without an LTV view, you cannot tell whether localized pricing is working. Trial starts going up does not prove revenue is growing. You need to track LTV per country before and after changing the pricing strategy. PPP-tuned pricing typically expands LTV via volume + retention even when individual ARPU drops.

How does LTV relate to ARPU?

ARPU is a snapshot of average revenue per user (monthly or annual). LTV is the integral of that ARPU over a customer's lifetime, accounting for churn. ARPU is easier to measure but tells you less. LTV is the metric that actually predicts whether your unit economics work.