What are CAC, LTV, and PBP in Marketing?
- CAC (Customer Acquisition Cost): Customer Acquisition Cost refers to the cost of getting customers to purchase a product or service.
- LTV (Customer Lifetime Value): Customer Lifetime Value is the net profit we can obtain from a customer.
- PBP (Payback Period): The payback period for capital investments refers to the time required to recover the investment cost or reach the break-even point. An ideal payback period is about one year.
LTV:CAC Ratio
The LTV:CAC ratio helps you determine how much you should spend to acquire a customer for sustainable growth.
1:1
= The more you sell, the more you lose.3:1
or higher = Good.5:1
or higher = Insufficient marketing investment.