What are CAC, LTV, PBP in marketing?

2291 2018-10-09 12:39
  • CAC: Customer Acquisition Cost is the cost to convert a customer to buy a product/service.
  • LTV: Lifetime Value is the estimated net profit we can make from a customer.
  • PBP: Payback Period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point. An ideal PBP is about 1 year.

LTV:CAC Ratio

LTV:CAC Ratio helps you determine how much you should be spending to acquire a customer, so that you can achieve sustainable growth.

  1. 1:1 = lose money the more you sell
  2. 3:1 or better = good.
  3. 5:1 or higher = under-investing in marketing

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