What is CAC:CLV Ratio?

To understand the marketing metric LTV to CAC ratio, we first need to break down the two components: Lifetime Value (LTV) and Customer Acquisition Cost (CAC).

Lifetime Value (LTV), sometimes referred to as customer lifetime value, is the average revenue a single customer is predicted to generate over the duration of their account.

Customer Acquisition Cost (CAC) is the average expense of gaining a single customer.

The ratio of lifetime value to customer acquisition cost helps you determine how much you should be spending to acquire a customer. Calculating this ratio will show if you’re spending too much per customer or if you’re missing opportunities from not spending enough.

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