biz-cac-ltv
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
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