Separates cost per acquisition from full customer acquisition cost, and shows the LTV to CAC ratio that decides whether growth is sustainable.
The gap is typically 30 to 60 percent. Reporting only the smaller number is how an account looks profitable in a dashboard while the business is not.
Below 1:1 you lose money on every customer and growth makes the problem larger. Around 3:1 is generally treated as sustainable. Far above 5:1 usually means you are underspending – there are profitable customers you could buy and are choosing not to.
If your conversion action is a form fill or a phone call, dividing by conversions gives cost per lead, not cost per customer. Multiply by your close rate to get the real figure.
Four levers, roughly in order of how quickly they work.
Four levers, roughly in order of how quickly they work. Improve close rate – usually the fastest and free. Raise conversion rate on the landing page. Increase average order value through bundling or upsell, which raises LTV rather than lowering CAC but moves the same ratio. Then, last, media efficiency.
Most teams start with the fourth because it is the one they control directly. It is normally the smallest of the four.