How to use it

• Use a CLTV formula that incorporates customer margin to ensure the costs to support that customer are incorporated

• Utilize CLTV as a ratio compared to your customer acquisition costs (CAC)

• A 3 to 1 ratio on CLTV/CAC is pretty solid.  For every dollar of customer acquisition cost (CAC), you should be returning $3 of customer lifetime value

Pro’s & con’s

Pro’s

Identifies which products or solutions are acquiring the most valuable customers, while also signaling opportunities to reduce churn.

Con’s

While helpful on its own, it is most valuable when combined with Customer Acquisition Cost (CAC). A LTV:CAC ratio of 3:1 or 4:1 is a solid target.