🎉
StackIt is now Superjoin.ai
Read More
Formula
LTV:CAC Ratio = Lifetime Value (LTV) / Customer Acquisition Cost (CAC)
Know your metric
Importance of
LTV:CAC Ratio
Long-Term Profitability Indicator
The Lifetime Value to Customer Acquisition Cost (LTV:CAC) ratio helps in assessing the long-term profitability and sustainability of customer relationships.
Strategic Decision Making
A healthy LTV:CAC ratio enables strategic decisions regarding marketing spend, customer service investments, and product development priorities.
Customer Relationship Value
This metric emphasizes the importance of nurturing customer relationships, guiding businesses to focus on both acquiring new customers and retaining existing ones.
Drawbacks of
LTV:CAC Ratio
Complex Calculation
Calculating LTV and CAC accurately involves complex analysis and can be influenced by multiple factors, making it challenging to maintain consistency.
Misleading Over Short Terms
The ratio can be misleading over short periods as initial acquisition costs might be high before customer value is fully realized.
Requires Detailed Data
Effective use of the LTV:CAC ratio requires detailed, accurate data collection and integration across various customer touchpoints, which can be resource-intensive.
Related Blogs
Related Templates
Try it now