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CMA Final · Entrepreneurship and Startup · Types of New Age Business

Case: A D2C brand, Nila Naturals, spends ₹600 to acquire each customer. Each customer yields an average contribution margin of ₹250 per year and stays for an average of 3 years. What is the lifetime value to customer acquisition cost position, and what does it suggest?

LTV is ₹250 × 3 years = ₹750 against a CAC of ₹600, giving a ratio of 1.25. That is positive but thin, well below the usual benchmark of about 3, so unit economics should improve before scaling aggressively.

  1. ALTV ₹750 against CAC ₹600; ratio 1.25, positive but thin, so unit economics need improvement before aggressive scalingCorrect
  2. BLTV ₹250 against CAC ₹600; ratio 0.42, loss-making on every customer
  3. CLTV ₹1,800 against CAC ₹600; ratio 3.0, very healthy
  4. DLTV ₹850 against CAC ₹600; ratio 1.42, strongly profitable

Explanation

LTV = contribution per year × lifetime = 250 × 3 = ₹750. Ratio to CAC = 750/600 = 1.25. This is above 1 but well below the commonly cited benchmark of about 3, so scaling spending aggressively would be risky. ₹1,800 wrongly uses CAC times 3, and ₹250 ignores the lifetime.

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