Definition
Customer lifetime is the expected duration a customer stays subscribed. It's often approximated from churn rate (with consistent time units).
Formula
Customer lifetime ~ 1 / churn rate
Common mistakes
- Using monthly churn to compute annual lifetime (unit mismatch).
- Assuming churn is constant over time (it often changes by tenure).
Why this matters
This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.
Practical checklist
- Write a 1-line definition for "Customer Lifetime" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Unit Economics Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Unit economics: CAC, payback, LTV, and LTV:CAC (how to model them)) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- Unit Economics Calculator: Model CAC, payback, LTV, and LTV:CAC together from ARPA, gross margin, and churn.
- Cohort LTV Forecast Calculator: Estimate cohort-based LTV using churn, expansion, gross margin, and optional discounting.
- Retention Curve Calculator: Model a simple cohort retention curve (logo retention) and translate it into expected revenue and gross profit over time.
- Two-stage Retention Curve Calculator: Model a retention curve with different churn rates for early months vs steady-state, and estimate expected value over time.
Guides
- Unit economics: CAC, payback, LTV, and LTV:CAC (how to model them): A practical unit economics guide: consistent definitions for CAC and LTV, how to calculate CAC payback period, and how to interpret LTV:CAC.
- Cohort LTV forecasting: churn, expansion, discounting (practical model): A practical guide to cohort-based LTV: why it beats simple churn formulas, how to choose assumptions, and how to interpret discounted LTV.
- Retention curves: how to read them and why they matter: A practical guide to retention curves: what they show, how to interpret churn vs retention, and how to connect retention to LTV and payback.
- Two-stage churn: modeling early drop-off vs steady-state retention: A practical guide to two-stage churn models: why early churn matters, how to model it, and how to connect retention improvements to LTV.