Customer Lifetime Value to Customer Acquisition Cost Ratio measures the relationship between the lifetime value of a customer and the cost of acquiring that customer with a same-day attribution and a blended CAC. This directly compares how much value a customer is bringing to your store over time, compared to the amount it takes to acquire them.
LTV to CAC Ratio = LTV / CAC
LTV to CAC Ratio (Order) vs LTV to CAC Ratio (Sign-up)
For LTV to CAC Ratio (Order), the columns in the dataset represent n+ months since the customer placed their first order.
For LTV to CAC Ratio (Sign-up), the columns in the dataset represent n+ months since the customer first signed up.
LTV to CAC Ratio is a signal of customer profitability, as well as sales and marketing efficiency. The ratio measures the cost of acquiring customers at the time of their first purchase, and compares it to their current Lifetime Value.
The numbers are multipliers, so for example, a ratio of 2.15 means that LTV is 2.15 times the CAC value. 1.00 would mean the cost = the return. Companies want to strive for numbers larger than 1.00, and 3.00 is a very healthy ratio to reach within 12 months in any cohort.
Updated about 1 year ago