Lifetime Value (LTV) calculation is the method by which a business calculates the value of a customer to the company by the customer’s full lifespan. LTV is amongst one of the business metrics that monitor business growth.
Customer Acquisition Cost (CAC) is the cumulative cost of sales and marketing endeavours that are required to gain a customer. In other words, CAC evaluates the cost of transforming a potential lead into a customer.
It is advisable to undertake the LTV/CAC ratio analysis at the end of every three months in the aim of achieving a better outcome of sales and marketing. Some descriptions of the LTV:CAC ratio are defined as per the table below.