How to Create Efficient Paid Ad Campaigns Using the LTV:CAC Ratio

How to Create Efficient Paid Ad Campaigns Using the LTV:CAC Ratio

Measurement & Analytics — Tue., Nov. 7, 2023

Evaluating performance accurately is vital for making strategic recommendations, allocating budget, and getting C-suite approval. Customer lifetime value (LTV) is an important metric to measure at any growing company. By measuring LTV in relation to customer acquisition cost (CAC), you can measure the investment required to earn a new customer.

The LTV:CAC ratio is important for profitability measurement, capital allocation, efficiency optimization, sustainability, strategic decision-making, and investor confidence. A good ratio for SaaS companies is 3:1 or better. Calculating it requires your company's historical performance data and an Excel spreadsheet.

The spreadsheet is only a guide and not the end-all-be-all for decisions. Start harnessing the power of LTV:CAC to enhance your marketing efforts and hire PPC consulting services to help allocate budget better.

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