LTV:CAC Ratio
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 | – |
| Abbreviation | LTV:CAC |
| Unit | Ratio |
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 |