LTV and CAC
LTV 와 CAC
Also known as: lifetime value · customer acquisition cost
Lifetime value is what one customer leaves behind; customer acquisition cost is what it took to get them. Their ratio says whether the business holds.
LTV is the profit a customer leaves over their relationship with you: monthly margin times months retained for subscriptions, order value times purchases for retail.
CAC is not only ad spend but everything it took to acquire them. Leaving out content and staff costs flatters the number without changing reality.
A common rule of thumb is LTV at three times CAC. It is not an absolute, but read together with payback period it tells you whether to spend more or stop.
- Payback periodHow many months to recover CAC. For cash flow this matters more than the ratio.
- Improving itRaising retention is usually easier than lowering CAC.