Equilibrium of Optimal Marketing Investment
LTV to CAC ratios are incredibly high in many B2B companies. Yet the same companies hold back on ramping up marketing spend.
If your LTV:CAC ratio is well above 3 (in many companies this number is north of 10) and your Payback Period is below 12 months, ramping up sales and marketing spend aggressively can create a tremendous amount of enterprise value.
Why hold back any spend when you'll recover your investment in less than a year and generate returns for 10+ years?
If your break-even point on marketing spend is at the 18-24 month mark and your LTV:CAC ratio is still above 10, then it's time to optimize and analyze what's working and where spend is being wasted. Once optimized, scale aggressively again.
If LTV:CAC is below 3 and Payback Period is north of 12 months, it's time to go back to product and customer feedback before you think about investing more into acquisition.
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