Definition
The ratio comparing customer lifetime value to the cost of acquiring that customer.
Formula
LTV / CAC
How to measure
Divide the calculated LTV for a customer segment by the CAC for that same segment and period.
Why track it
A ratio below roughly 3:1 signals acquisition spend may be too aggressive relative to the value each customer generates.
Example
A company with $900 LTV and $300 CAC reports a 3:1 LTV:CAC ratio.
FAQ
- What is LTV:CAC Ratio?
- The ratio comparing customer lifetime value to the cost of acquiring that customer.
- How do you calculate LTV:CAC Ratio?
- LTV / CAC
- Why track LTV:CAC Ratio?
- A ratio below roughly 3:1 signals acquisition spend may be too aggressive relative to the value each customer generates.