LTV:CAC compares customer lifetime value to customer acquisition cost. It shows whether the value created by a customer is large enough relative to what it cost to acquire them.
It shows whether the value created by a customer is large enough relative to what it cost to acquire them.
| Field | Detail |
|---|---|
| Definition | LTV:CAC compares customer lifetime value to customer acquisition cost. |
| Formula | Lifetime Value / Customer Acquisition Cost |
| Why it matters | LTV:CAC helps teams avoid underinvesting in high-value programs or overspending on users who never repay acquisition cost. |
| Good benchmark context | LTV:CAC is most useful in subscription, SaaS, retention-heavy, and repeat-purchase businesses where customer value compounds over time. |
Glossary entries should explain where interpretation goes wrong, not just repeat a formula.
| Common mistake |
|---|
| Using blended LTV:CAC without cohort-level retention context. |
| Ignoring gross margin when estimating lifetime value. |
| Applying it as a short-term optimization metric for every campaign. |
LTV:CAC helps teams avoid underinvesting in high-value programs or overspending on users who never repay acquisition cost.
It shows whether the value created by a customer is large enough relative to what it cost to acquire them.
LTV:CAC is most useful in subscription, SaaS, retention-heavy, and repeat-purchase businesses where customer value compounds over time.
It shows whether the value created by a customer is large enough relative to what it cost to acquire them.
LTV:CAC is most useful in subscription, SaaS, retention-heavy, and repeat-purchase businesses where customer value compounds over time.