Find Out Exactly What A Subscriber Is Worth, From Their First Order To The Most You Should Ever Spend Acquiring One
The exact formula, a worked example with real numbers, and the 5 metrics that make it usable.
- The one mistake that makes most LTV numbers meaningless (and the formula that fixes it)
- A full worked example: exact contribution math from price down to net contribution per customer
- The 5 numbers you need to track, including the one most brands never look at
- How to compare contribution LTV against CAC to know what you can actually afford to spend on acquisition
Most brands report LTV as price times number of orders. That number is almost always wrong, because it ignores what it actually costs to serve every order. Below is the interactive version of the formula we use to find what a subscriber is really worth, run it with your own numbers.
Run Your Own Numbers
Cost per order
Retention & acquisition
The Core Mistake: Revenue LTV Instead Of Contribution LTV
Don't calculate LTV as average order value times number of orders. That number can look great and still be misleading, because it includes revenue that barely produces any profit.
Track contribution LTV instead: what's actually left after the real costs of serving that order.
The Contribution LTV Formula
Subscription price, minus COGS, minus shipping, minus payment processing fees, minus other variable costs, equals contribution per order.
Then multiply contribution per order by the average number of orders a subscriber stays for, to get contribution LTV.
Worked Example
The Math, Filled In
If the average subscriber stays for 6 orders, contribution LTV is $25 x 6 = $150.
Compare that to the naive number: revenue LTV would be reported as $300 (price x orders). That $300 figure is much less useful, it includes revenue that barely produces profit once real costs are accounted for.
Putting It Together
Compare contribution LTV against CAC to get the number that actually matters: net contribution after acquisition cost.
Using the example above: contribution LTV of $150, minus a CAC of $60, leaves a net contribution of $90 per customer. That's the number to optimize, not top-line revenue.
The Numbers You Actually Need To Track
If you want help implementing any part of this, that's exactly what we do at Scalo. Reach out at getscalo.com.