Your Results
Customer Lifetime Value (LTV)
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The total revenue a customer is expected to generate over their relationship with your brand.
Customer Acquisition Cost (CAC)
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The average cost to acquire one new customer.
Payback Period (Months)
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The time it takes to recoup the cost of acquiring a customer.
LTV:CAC Ratio
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A key indicator of marketing efficiency and customer profitability.
How This Calculator Works
This calculator uses your average order value, purchase frequency, and gross margin to determine Customer Lifetime Value (LTV). It then compares this to your Customer Acquisition Cost (CAC) to calculate the payback period, showing how long it takes to recoup marketing spend.
When to Use This Tool
A new organic granola brand is planning its first large-scale digital advertising campaign.
The tool reveals if the projected customer acquisition cost makes the campaign profitable, helping to set realistic budget and sales targets.
An established beverage company is considering a price increase for its popular sparkling water line.
It shows how changes in average order value or gross margin impact LTV and overall customer profitability, guiding pricing decisions.
Common Questions
Why is understanding unit economics crucial for my CPG brand?
It helps you assess the profitability of each customer, guiding decisions on marketing spend, pricing, and product development to ensure sustainable growth.
What data do I need to use this calculator effectively?
You'll need your average order value, customer purchase frequency, gross margin percentage, total marketing spend for a period, and the number of new customers acquired during that same period.
How can I improve my LTV:CAC ratio?
Focus on increasing average order value through bundles, improving customer retention with loyalty programs, or reducing customer acquisition costs by optimizing marketing channels and messaging.
Does this tool account for subscription-based CPG products?
Yes, by inputting your average subscription value and typical customer retention rate, it can provide relevant LTV and payback period insights for recurring revenue models.
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