CAC and LTV Analysis

Overview

CAC (Customer Acquisition Cost) and LTV (Customer Lifetime Value) are the two fundamental unit economics metrics. Together they answer: "Does each customer generate more revenue than it costs to acquire them?" The LTV:CAC ratio is the single most important indicator of marketing efficiency and business model viability.

When to Use

Trigger conditions:

• User evaluating marketing spend efficiency
• User asks "what's each customer worth?" or "are we spending too much on marketing?"
• User assessing business model viability or fundraising metrics
• User needs to allocate budget across acquisition channels

When NOT to use:

• For product pricing decisions → use Pricing Strategy
• For customer segmentation → use STP or RFM
• For comprehensive financial analysis → use financial ratios