CAC and LTV Awareness

As a Product Marketing Manager, awareness of your actual CAC and LTV is crucial.

Your Cost of Acquisition (CAC) is linked with your margins.

Often, CAC is thought to be SEM expenses but it's every $ you spend from the point of discovery till the money from a customer hits the bank.

This includes salaries of sales/marketing reps, tool subscriptions and onboarding costs.

It's like when you weigh your luggage at the airport - the weight of the bags itself are counted towards your overall limit.

Your Lifetime Value (LTV) is linked with the revenue potential of the business.

If customers churn soon, your LTV takes a hit. Retention is the life support for LTV.

It's the mileage you get when you fill your car with petrol.

The ratio between LTV and CAC is linked with how sustainable your business is.

If LTV is many multiples of the CAC, you've got a business that can keep reinvesting in its own growth.

Businesses may tolerate a lower ratio for some time in hopes of capturing mass market share.