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Performance Marketing
Definition
Ratio of customer lifetime value to customer acquisition cost. SaaS healthy band is 3-5x. Below 2x means the unit economics break; above 5x usually signals under-investment in growth.
Related terms
LTV
LTVLifetime Value. The total expected revenue from a customer over the duration of the relationship. Critical input to CAC payback calculations. SaaS LTV is typically modeled as ARPU divided by monthly churn rate.
CAC
Customer Acquisition Cost, total marketing and sales cost divided by new customers acquired in the period. The denominator question is whether to include team salaries, software, and overhead, be consistent in how you define it.
Same category
We run Performance Marketing-led engagements every week. A 20-minute call gets you a read on whether ltv:cac ratio is the right next move for your stack.