LTV:CAC – Why Is It One of the Most Important eCommerce Metrics?

eCommerce data is everywhere, and so are those important metrics. From ROAS and AOV to contribution margin and sell-through rates, it can feel like you’re swimming in acronyms. But if there’s one ratio worth surfacing above the rest, it’s LTV:CAC.

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Why? Because it tells you something fundamental: whether your customer acquisition strategy is actually sustainable. The LTV:CAC ratio compares the value you get from a customer (their Lifetime Value) to what it costs to acquire them (Customer Acquisition Cost). It’s the fastest way to see if your marketing spend is fuelling profitable growth or just burning budget.

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In this post, we’ll break down exactly what LTV:CAC is, how to calculate it, and why it’s a hero metric for smart, data-driven eCommerce businesses. Ready to make your data work harder? Let’s go!

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What is the LTV CAC ratio, really?

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At its simplest, the LTV:CAC ratio measures how much long-term revenue a customer brings in compared to how much it cost to acquire them.

Let’s break that down:

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• LTV (Lifetime Value) is the total revenue you expect to earn from a customer over the course of their relationship with your brand.
  
  
• CAC (Customer Acquisition Cost) is the average amount you spend to acquire that customer. Think ad spend, discounts, agency fees, etc.
  
  

So when you calculate LTV:CAC, you're answering one critical question: Was this customer worth it?

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Say your CAC is $100, and your LTV is $500. That gives you a 5:1 ratio, which means for every $1 you spend, you earn $5 back. That’s healthy, profitable growth. But if your ratio is closer to 1:1, you’re barely breaking even. And if it drops below 1? You’re paying more to acquire customers than they’re bringing in.

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This ratio cuts through the noise and gives you a clear view of whether your acquisition strategy is fuelling sustainable growth or just draining your budget.

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Why should every eCommerce brand be tracking it?

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There's no denying that, as a business, you always want to focus on narrowing down relevant metrics. Those will give you insights into profitability, and they make it easier to understand how good of a customer someone truly is. If a customer is not profitable, then it doesn't make sense to invest more into that relationship, or you can start adding discounts and ways to increase the profit ratio. Plus, there are other benefits you get from the LTV:CAC ratio, such as:

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• You will figure out the long-term profitability of a customer. Did you overspend on customer acquisition? Are you getting a really good return on investment, or are you barely breaking even? These things matter, and you have to address them if you want the best possible outcome. 

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• Additionally, the LTV:CAC ratio can help align your marketing with the business's health. Having a great ratio means your business is doing well. But if you barely have a ratio to keep the business afloat, that means you need to make some changes. And it's a good idea to have access to all this information, because it can help your business immensely. 

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• Once you know what a good LTV to CAC ratio is, it becomes easier to allocate your budget wisely. You can avoid investments that will provide a bad return. And in doing so, you are improving the business health, which is extremely important to focus on. Even if it might not seem like much, in the end, you are getting an excellent way of enhancing your results, and it's totally worth it.

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How to Calculate LTV and CAC (Without the Headache)

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Before you can calculate your LTV:CAC ratio, you need to know your numbers. Specifically: how much a customer is worth over time (LTV), and how much it costs to acquire them (CAC). Once you’ve got those, the ratio is easy:

LTV ÷ CAC = your LTV:CAC ratio.

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Here’s how to break it down:

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Calculating LTV (Lifetime Value)

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LTV tells you how much revenue you can expect from a customer over their time with your brand. The basic formula looks like this:

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LTV = Average Order Value × Purchase Frequency × Customer Lifespan – Returns & Refunds

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With Conjura, you don’t have to guesstimate these figures. We pull real-time data across your store, ad platforms and customer history to give you an accurate view of what your customers are really worth, no spreadsheets required.

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Calculating CAC (Customer Acquisition Cost)

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CAC shows how much it costs to acquire a new customer, on average. Use this formula:

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CAC = Total Marketing & Sales Spend ÷ Number of New Customers Acquired

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Make sure you include all acquisition-related costs: ad spend, agency fees, influencer partnerships, even one-off promos. And remember, we’re only counting new customers here, not repeat ones. When you calculate CAC correctly, you get a clear picture of how efficient your acquisition efforts really are. And when paired with LTV, you’ll know if your marketing spend is fuelling profit or just chasing vanity metrics.

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Why does it matter more than surface metrics like ROAS or AOV?

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AOV and ROAS are surface metrics, which can prove to be quite handy at times. But as we said, they are surface-level metrics, so you're not getting all the info you would need. For example, ROAS only measures immediate returns. It doesn't take into account repeat purchases, ongoing subscriptions, customer loyalty, and so on. Even if the ROAS is high, it can be misleading when the profit margins are low.

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A similar thing is valid when it comes to AOV. When it comes to this metric, you will know how much a customer spends per order. But it doesn't show how many times that customer will make a purchase, and it ignores the CAC. Plus, you can't predict any profitability or long-term benefits that come from a customer, which can prove to be very challenging. 

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Once you know how to calculate CAC and LTV, you will see why the LTV CAC ratio is very important. You have a good insight into the overtime profitability, and that does matter quite a bit. In addition, this ratio helps you find better strategies that focus on growth. On top of that, you are forced into getting a more holistic view of the funnel. And yes, investors tend to prioritize the LTV/CAC ratio because it's effective and it can provide quantifiable results. You know whether a customer is profitable or not, and the strategies that ensue can be a whole lot better in the long term.

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What is a good LTV to CAC ratio?

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A lot of people are wondering what is a good LTV to CAC ratio. The truth is, these ratios can vary quite a bit, and it always depends on a multitude of factors. But realistically, you always have certain numbers to strive towards, and that is surely a thing that you need to consider. In this case, we made a list with the most common values to consider:

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• 1:1 means you're barely breaking even, it's not scalable, and you need to find some new strategies that you have to focus on. Those can be incredibly important, since you can eventually increase the revenue you get from clients.

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• 2:1 is an acceptable LTV CAC ratio, but it's definitely not ideal. What this shows is you have some tight margins, and those can prove to be a problem, which is something to keep in mind. 

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• 3:1 is a good LTV to CAC ratio. It shows that you have a healthy ROI from clients, and there's sustainable growth. Granted, it can always be better, but in the end, that's the most important thing to strive towards. 

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• Once you have a 4:1 or higher than that, you might be underinvesting in your growth. 4:1 or higher is a very strong ratio, and it might show you don't spend enough to grow faster. In these cases, you actually want to spend more, as it will bring you even better growth opportunities. 

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Common mistakes in measuring LTV/CAC

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Measuring the LTV to CAC ratio is usually very straightforward. As you saw, learning how to calculate CAC and LTV is simple, and then the ratio just requires you to compare the two and see if you overspend. However, there are certain mistakes that companies make when it comes to measuring the CAC and LTV. It might not seem like a lot, but even the smallest mistakes can prove to be problematic.

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• Some companies tend to use gross revenue as a metric instead of the net LTV. That's why it's a good idea to subtract discounts, refunds, and returns. It will give you a more realistic sense of the overall customer value.

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• If you treat all customers the same, you will not see those customers who deliver the biggest ROI. Realistically, around 20% of your customers might bring 80% of the total LTV. 

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• Ignoring channel and cohort availability. If you do this and just aggregate data, it will just make things less cohesive, and in the end, it can mask certain benefits and opportunities.

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• When you use static or outdated data, that's a problem. Obviously, the info is not accurate, and you need real-time data in order to ensure the info you get is accurate. That's why using a tool like Conjura is great, because you always have access to real-time data and comprehensive insights. 

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Use cases and tactical improvements

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Tracking your LTV:CAC is a roadmap for action. While it shows how your business is performing, its real power lies in helping you decide what to do next. With the right insights, you can identify which acquisition channels are worth the investment and which ones are just burning budget. For example, cutting high-CAC channels with low LTV can instantly improve your profitability. On the flip side, you can grow LTV by optimising customer onboarding, offering smarter product bundles, or enhancing your retention strategy. Even if acquiring customers is expensive, increasing their long-term value keeps your ratio healthy. It's also worth refining your audience targeting: doubling down on segments with strong LTV:CAC returns can transform performance. And don't overlook the impact of subscriptions and loyalty programmes, when done right, they can raise LTV significantly. If your ratio starts to dip, it’s a signal to act fast. Making smart, data-driven decisions early helps avoid bigger issues down the line and that’s where the true ROI of LTV:CAC analysis kicks in.

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How Conjura Makes LTV:CAC Analysis Accurate and Actionable

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LTV:CAC is only as good as the data behind it and that’s where Conjura shines. Our platform doesn’t just calculate the ratio for you. It makes it meaningful, granular, and ready to act on. Here’s how we do it:

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Omnichannel Integration

We connect the dots across all your platforms - Shopify, Amazon, Google Ads, Meta, TikTok, and more - so your LTV and CAC figures aren’t siloed by channel. You get one unified view of customer acquisition and value, wherever it happens.

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Smart Benchmarks & Alerts

Wondering how your LTV:CAC stacks up? Conjura gives you context with peer benchmarks and proactive alerts, so you can spot outliers and opportunities as they emerge.

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Channel & Product Attribution

Want to know which campaigns or products drive the most valuable customers? We attribute LTV and CAC down to the product and channel level, so you can double down on what’s working and cut what’s not.

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Deep Cohort Analysis

Explore performance by acquisition month, discount offer, campaign type - you name it. Conjura’s cohort tools make it easy to understand how different customer segments behave over time.

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Granular LTV Modeling

See lifetime value at the level that matters to you, by SKU, customer segment, or individual customer. Get the precision you need to drive smart acquisition and retention strategies.

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Real-Time CAC Tracking

No more waiting for end-of-month reports. Track CAC across all your marketing channels in real time, with all costs, including agency fees and offline spend, in one place.

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LTV:CAC In a Nutshell

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Learning the LTV/CAC ratio is crucial if you want to grow your business. That's why it's important to have the right tools, which can help you figure out how to calculate LTV and CAC, but also this crucial ratio. With Conjura, you get a clearer view of your LTV to CAC ratio, which can be a major insight into the profitability of your business. Don't hesitate and start using Conjura today if you're looking for the best eCommerce metrics, like the LTV CAC ratio!

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Do you want to optimize your business performance with LTV:CAC metrics? Book a demo of Conjura.

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