20Growth: Top Five Growth Lessons Scaling Stitchfix to IPO, How to Master the Art of Paid Marketing, Why CAC/LTV is a BS Metric & How To Use Payback Period as an Alternative to CAC/LTV with Mike Duboe, Partner @ Greylock
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The LTV Formula Is a Tool and Not a Strategy
The LTV (Lifetime Value) metric is flawed because it assumes a known customer lifetime, which is often difficult to determine early on in a company's journey. Additionally, the LTV formula is often calculated on a blended basis, ignoring the variance in customer quality by channel, keyword, audience, etc. A better alternative is the payback period, which removes the notion of lifetime and can be calculated on a more granular level. By using the payback period, companies can determine how many months of growth margin it takes to pay back the initial incremental CPA. It is important to calculate this on a paid tact basis, rather than a blended tact basis, and to consider different thresholds for different customer segments. However, it is crucial to remember that the LTV formula is just a tool and not a strategy, as it is often misused to justify larger budgets. Ultimately, having a deeper understanding of user psychology and being great at creative can provide a competitive edge over purely mechanical LTV optimization.
Remember Everything You Learn from Podcasts
