LTV meaning
LTV (Life Time Value): Also known as CLV (Customer Life Time Value), it refers to the average value a customer contributes to a company over their entire relationship.
CAC (Customer Acquisition Cost): Refers to the cost of acquiring a single customer. If a product's CAC is less than its LTV, it indicates a high-quality acquisition channel and strong customer value. Conversely, if CAC exceeds LTV, it suggests that acquisition costs are too high, customer quality needs improvement, and the acquisition channels require optimization.
A ratio of LTV to CAC equaling 3 represents the healthiest state for a company (a ratio below 3 indicates low conversion efficiency, while a ratio above 3 suggests the company is being too conservative in market expansion).
LTV = Average user lifespan (days) × Average daily revenue per user = LT × ARPU