There is another important way to use this type of guidance: segmentation. Early stage companies will often test their product using a few different usescustomer typespricing modelsverticals. It is very useful to examine which segments show the quickest return to CAC or the highest LTV in order to understand which will be the most profitable to pursue.
HubSpot-cashflow
You can see from the second row of this table how they have significantly improved their unit economics LTV:CAC ratio over the five quarters shown. The primary driver for this was reducing their MRR cameroon mobile database churn rate from 3.5% to 1.5%. This has significantly increased the lifetime value of their customers. They have also been able to increase their AVG MRR per customer.
HubSpot Experience :
We used this chart to guide many of our business decisions at HubSpot in 2011 and early 2012. By breaking down LTV:CAC into its components, we could examine each metric and understand which levers we could pull to drive overall improvement.
It turns out that the levers we can pull vary by segment. For example, in the SMB market, we have the right sales process in place, but have opportunities to increase LTV by improving our product to reduce churn and increasing our average price in that segment. In contrast, in the VSB very small business space, there isn’t as much upside to LTV VSB customers have less money and naturally higher churn, so we’re focused on reducing CAC by removing friction from our sales process and moving more of our sales pipeline.