Journal · LTV
Pricing experiments without polluting LTV
Lifetime value is already a fragile number in subscription revenue analytics. A six-week price test, mixed into the same cohort as list-price logos, can make it unusable for a year. This is avoidable. It is rarely avoided.
LTV is a cohort claim
When teams say LTV they almost always mean “average recognised revenue over observed life, sometimes discounted, sometimes not, often multiplied by a margin someone liked.” That claim only holds for a defined entry group. If half the group paid 20% less because growth ran a test, the average is not a customer truth. It is a blended artifact. Blended artifacts should not drive acquisition spend.
Tag the experiment at invoice level
CRM flags are not enough. Sales will forget to tick them. The invoice, or the price book ID on the invoice, is the durable tag. In class we insist that experimental price books never share an ID with list. When the test ends, retire the book; do not recycle it for a promotion six months later. Recycled IDs are how last year’s test keeps haunting this year’s LTV.
Do not let the test inherit the house curve
A common shortcut: compute retention from the whole book, then apply it to experimental ARPU. That assumes experimental logos behave like list-price logos. Sometimes they churn faster because they were bargain hunters. Sometimes they stay longer because the discount bought goodwill. You do not know until you give them their own curve, even if n is small. Small and honest beats large and mixed.
Board language
Print two LTVs during a test: list cohort and experimental cohort, both with n and with the same recognition rules. If the test is too new for a life curve, say “insufficient life” rather than borrowing the house number. Insufficient life is a respectable sentence. A fake LTV used to green-light paid acquisition is not.
Controller Circle has sat with teams who had to unwind a year of CAC decisions after a test was folded into LTV. Unwinding is possible. It is also more expensive than tagging invoices in week one.