The formula to calculate the CLTV Ratio (R) is:
\[ R = \frac{CLTV}{CAC} \]
Where:
Let's say the Customer Lifetime Value (CLTV) is $10,000, and the Customer Acquisition Cost (CAC) is $2,000. Using the formula:
\[ R = \frac{10000}{2000} \]
We get:
\[ R = 5 \]
So, the CLTV Ratio (\( R \)) is 5.
The CLTV Ratio, or Customer Lifetime Value Ratio, is a metric used to measure the relationship between the lifetime value of a customer and the cost of acquiring that customer. This ratio is crucial for businesses to understand the return on investment (ROI) from their marketing and sales efforts. A higher CLTV Ratio indicates that the value generated from customers significantly outweighs the cost of acquiring them, which is a positive sign for business profitability and sustainability.