How does LTV in SaaS differ from LTV in e-commerce?

LTV (Lifetime Value) in SaaS and e-commerce differs in several key aspects:

• Revenue Model:

  • In SaaS, revenue usually comes regularly (subscription), so LTV is calculated based on the average revenue per period multiplied by the average subscription duration.
  • In e-commerce, revenue is one-time or irregular, so LTV considers the average check and purchase frequency over the customer's lifetime.

• Retention Period:

  • In SaaS, retaining the customer for a long term is important, so LTV heavily depends on churn rate.
  • In e-commerce, retention is less critical, but repeat purchase activity is important.

• Metrics for Calculation:

  • In SaaS, often use MRR (Monthly Recurring Revenue), churn rate, and CAC (Customer Acquisition Cost).
  • In e-commerce, the average check, purchase frequency, and product margin are used.

Thus, LTV in SaaS reflects the value of a customer as a subscriber with regular payments, while in e-commerce, it reflects a buyer with certain purchasing activity and an average check.