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The definition of LTV:CAC, or the customer lifetime value to customer acquisition cost ratio, measures the relationship between the lifetime value of a customer against the cost of acquiring them.
This ratio signals the profitability of your customers, as well as the efficiency of your marketing.
Consider a company with a gross margin of 82% and a monthly customer churn of 1.5%.If the average customer spent £50, then the calculation would look like this:
82% x (1/1.5) x 50 = £2,733