Definition

The Lifetime Value to Customer Acquisition Cost Ratio puts the value a customer creates and the costs incurred to acquire him into perspective.

Why use it

The LTV:CAC Ratio enables you to stay on top of your marketing spendings and adapt them if necessary.

Alias
AbbreviationLTV:CAC
UnitRatio

 

Calculation

The average lifetime value of a customer divided by the customer acquisition cost gives the LTV:CAC Ratio.

LTV
÷ CAC
LTV:CAC Ratio

Example

The average lifetime value of a company’s customers is 100 €, their CAC amounts to 25 €.

100 €
÷ 25 €
4:1 LTV:CAC Ratio