Which two values does LTV compare with CAC to assess profitability?

• A. AOV and CAC
• B. Revenue and costs
• C. LTV and CAC
• D. Impressions and clicks

Answer: (C)

Understanding profitability in a customer-centric model starts with comparing how much value a customer generates over their entire relationship to how much you spend to acquire them. Lifetime value (LTV) captures the total value a customer brings over time, while customer acquisition cost (CAC) is the expense to win that customer. When you compare these two, you can see if the value generated exceeds the cost to obtain the customer. If LTV is greater than CAC, you’re profitable on that customer; if not, you’re not. The ratio of LTV to CAC is a common way to gauge profitability and health of a marketing program.

Other options don’t fit as neatly: average order value with CAC mixes price per sale with acquisition cost but misses the full lifetime value; revenue and costs are too broad and don’t focus on the customer lifetime dynamics; impressions and clicks measure reach, not the financial return per customer.