LTV/CAC ratio: the number that tells you if your acquisition is sustainable

There is a question almost no marketplace seller asks out loud, and it decides whether the business grows or merely moves: how much does it cost you to win a customer, and how much does that customer leave behind before disappearing? Until that question has a number attached, every peso you put into advertising is an act of faith. You raise the budget because sales are up, you cut it because the month got tight, and at no point do you know whether you are buying cheap customers or overpaying for sales you would have made anyway.

The LTV/CAC ratio exists precisely for this. It is a division: customer lifetime value over the cost of acquiring that customer. If the result is 1, each customer returns exactly what you paid for them and nothing is left for warehouse rent, payroll or restocking. If it is 5, you are probably leaving growth on the table out of fear of spending. The useful answer sits in between, and where in between depends on your category, your margin and —this is the part nobody says— the channel you sell on.

The concrete problem for a Mexican seller is that the two halves of that division live in different places and neither arrives pre-calculated. Ad spend sits in the Amazon Ads console and in MercadoLibre’s Product Ads. Orders sit in the settlement and in the sales report. Real product costs sit in your purchasing spreadsheet. And “the same customer buying again” is, on a marketplace, close to impossible to trace with what the channel hands you. So the single most important number about your acquisition never gets calculated at all.

This article is about building that number from what you actually have, what proportion published measurements call healthy, where that proportion came from, and why copying it straight into a marketplace business is a mistake that gets expensive.

what each half of the division actually measures

CAC stands for customer acquisition cost. It is everything you spent to bring in new buyers over a period, divided by the number of new customers that arrived in that period. The strict version includes advertising, agency fees, marketing tools and the salary of whoever runs them. The practical version, for a seller working alone or with a small team, starts with ad spend, which is both the largest slice and the only one you have measured down to the peso.

LTV is lifetime value. It is not how much that customer bills you, it is how much profit they leave you across the whole relationship. That distinction decides whether the number is useful or a lie. If you compute LTV on gross revenue, any ratio will look handsome, because you are comparing sales pesos against spending pesos. The honest comparison is profit against spend: the customer’s accumulated contribution margin against what it cost to bring them in.

The compact LTV formula for a product business is straightforward: average order value × contribution margin × the number of purchases the customer makes before leaving. Three factors, none of them guessable. Average order value comes from your orders; contribution margin comes from your real per-SKU costs; and purchase count comes from your history, assuming you can identify the same buyer twice.

Glossary: real net margin, with everything deducted →

the 3-to-1 everyone repeats and almost nobody places

The number you will find quoted everywhere is 3 to 1: lifetime value should be at least triple the cost of acquisition. It is worth knowing where it came from, because the provenance changes how you should use it.

That rule was popularized by David Skok, an investor at Matrix Partners, in his SaaS metrics series published early last decade and updated since. His framing was explicitly a guideline, not a research finding: at 3 to 1, once acquisition is paid for, enough margin remains to cover development, administration and a return on capital. The original context was subscription software companies in the United States, with enormous gross margins and customers who stay paying for years.

None of that describes a seller on Amazon Mexico or MercadoLibre Mexico. Not the gross margin, not the recurrence, not the cost structure. The fact that the rule hardened into dogma does not make it transferable. It is where the conversation starts, not where it ends.

what ecommerce measurements say, and which market they come from

When you look for the product-business equivalent, compilations published through 2026 —Shopify’s own guides, conversion-optimization agencies, analytics vendors— put the reasonable ecommerce range between 2 to 1 and 4 to 1, and note that direct-to-consumer brands typically run lower, between 1.5 to 1 and 3 to 1, precisely because their gross margin sits around 40 to 60 percent against software’s 70 to 85 percent.

This deserves saying plainly: those figures come from US and European ecommerce, compiled by tool vendors and consultancies, not by an independent body. There is no public, verifiable LTV/CAC benchmark for marketplace sellers in Mexico. If someone shows you one with two decimal places, ask about the sample.

The most useful thing in those same compilations is not the range but the warning attached to it: a 2.5 to 1 on a high-ticket product with healthy margin can be a better business than a 4.5 to 1 on a low-ticket one, because what pays the rent is not the proportion, it is the absolute contribution pesos per customer. The ratio is for comparing your own campaigns against each other. To decide, you also need the amount.

why a marketplace forces you to adjust the number

Here is the part the ecommerce guides do not cover, and the part that hits you hardest.

In your own store, the customer is yours: you have the email, the history and the ability to sell again without paying for them a second time. On a marketplace, the customer belongs to the marketplace. You do not receive their email, you cannot build a list, and the channel reserves the relationship for itself. Amazon has opened limited in-platform tools for brand-registered sellers to reach followers and repeat buyers, but the addresses never change hands; confirm the current state in Seller Central, since these programs change often.

The practical consequence is uncomfortable but clear. If you cannot measure repurchase, your measurable LTV collapses toward the value of a single order, and the ratio you compute is really “contribution margin of one sale over the ad cost of that sale”. That is not LTV/CAC, it is per-transaction profitability under another name. And since it is the number you can actually defend with data, it is the one to use — while being honest with yourself about what you are measuring.

There is a second adjustment: on a marketplace, part of your traffic is organic. Divide all your ad spend by all your orders and you are charging acquisition cost to sales that arrived on their own, which makes your CAC artificially low. Divide it only by ad-attributed orders and you ignore that advertising also pushes organic ranking. Neither reading is complete, which is why TACoS —ad spend against total sales— is the honest bridge between them; we work through it in TACoS vs ACoS.

an example where the arithmetic adds up

The numbers that follow are an illustrative example, not a market average.

You sell a school backpack at 1,160 pesos with VAT included. The price excluding VAT is 1,000. The product costs you 420 landed in your warehouse. The channel commission takes 150, logistics 110 and packaging 15. Your contribution margin per unit is 1,000 − 420 − 150 − 110 − 15 = 305 pesos.

Over the month you sold 300 units and spent 27,000 pesos on advertising. Attribute that spend across the 300 orders and your CAC is 90 pesos per customer. The ratio, using the contribution margin of a single purchase, is 305 ÷ 90 = 3.4 to 1. It looks good.

Now run the honest version. That 305 still has not paid for the warehouse, the payroll, the 4 percent return rate you have on record, or the hours of whoever runs the campaigns. If returns cost you an averaged 12 pesos per unit and allocated fixed costs come to 60 pesos per order, the contribution that is genuinely free is 233, and the real ratio drops to 2.6 to 1. Still viable. But it is a different conversation than the 3.4, and the gap between the two is exactly what makes you believe a campaign is working when it is barely breaking even.

Glossary: ACoS, how much of your sale goes to advertising →

how to set your own baseline when no benchmark exists

Since there is no reliable Mexican marketplace reference, the serious path is to build your own. It is more work than copying a number off the internet, and it is the only reading that will survive a budget decision.

• Freeze a reference period. Three stable months, with no Buen Fin or Hot Sale inside them, so seasonality does not contaminate the base.
• Compute contribution margin per SKU, not per catalog. A global average hides the fact that half your products are financing the other half.
• Split ad spend by product family, not as one block. The CAC of your highest-rotation line has nothing to do with the CAC of your niche product.
• Write down the resulting ratio and the date. It is not an absolute truth; it is a comparison point against yourself next quarter.
• Revisit it whenever something structural changes: a commission, a logistics fee, a supplier. Those moves shift the numerator without advertising moving a single peso.

After two or three quarters, that history is worth more than any imported benchmark, because it is measured on your products, your commissions and your customers. It is the same argument we make in the value of your history: comparing against yourself is the comparison that actually controls the variables.

which decisions the number changes once you have it

A calculated ratio is not report decoration. It is permission to spend more, or a prohibition against it.

If your ratio for a family sits comfortably above 3 and you have inventory, the right call is usually to raise the budget on that family, not to spread evenly. If it is stuck at 1.5, the problem is almost never the campaign: it is the price, the product cost or the category commission, and no amount of bid tuning fixes that. And if it comes out above 6 on a line with stock available, you are being conservative about something the market already validated.

The most common mistake is treating the ratio as a general traffic light for the business. Calculated per family and read alongside contribution margin per order, it becomes an allocation tool: where the next advertising peso goes and where it comes from.

how this reads in iqseller

iqseller does not hand you a calculated LTV/CAC, and saying so is more useful than pretending otherwise: per-customer repurchase data is not something the marketplace releases, so nobody can compute it honestly on your behalf. What the panel does solve are the two pieces that make your arithmetic real instead of aspirational.

On the numerator side, the Profitability module computes net margin per SKU using the COGS you load, the commissions from the Amazon settlement and from MercadoLibre orders, FBA and Full fees, shipping, and the VAT and withholding breakdown. That is real contribution margin, not the figure you get by subtracting cost from list price. On the denominator side, ad spend from both channels sits next to those sales, and the Parent → Model → SKU tree lets you group by family instead of averaging the whole catalog.

With that, you do the division yourself in two minutes, on numbers that hold up. Think of a seller moving the same line on Amazon and on MercadoLibre: they see that contribution margin per unit is 40 percent higher on one channel because of commission and logistics differences, while ad cost per order is similar. The conclusion —shift budget between channels— is obvious when both numbers share a screen, and invisible when they live in two consoles and a spreadsheet.

The LTV/CAC ratio is not a magic number and it has no universally correct value. It is a disciplined way of asking whether what you pay for growth is actually coming back. Calculated on real margin, per family, and compared against your own history rather than against a US software benchmark, it stops being investor jargon and becomes the thing that decides next month’s budget.