Case #012
The brand optimized for ROAS and average order value. Both metrics looked strong. But 12-month cohort LTV was declining every quarter — and nobody was measuring it.
How the Miscalculation Compounds
Q1
Team reports strong ROAS and rising AOV. Board approves acquisition budget increase.
Q2
Repeat purchase rate quietly drops from 34% to 27%. Nobody notices.
Q3
CAC rises as market gets more competitive. LTV does not rise with it.
Q4
First cohort analysis reveals 12-month LTV below CAC for two acquisition channels. The math was wrong for a year.
LTV:CAC Ratio by Acquisition Channel
LTV Gap| Channel | Stated LTV | Actual LTV (net) | LTV:CAC Ratio |
|---|---|---|---|
| Paid Social | $185 | $112 | 0.83x |
| Search | $210 | $148 | 1.14x |
| Influencer | $170 | $88 | 0.61x |
| Email Acq. | $195 | $165 | 2.1x |
Evidence Detected
AOV-based LTV
Lifetime value calculated as AOV × average orders — ignoring returns, discounts, and one-time buyers.
No cohort tracking
LTV never measured per acquisition month or channel. Blended average masked channel-specific decay.
Rising CAC ignored
Acquisition cost increased 28% over the year. LTV benchmark was never updated.
Repeat rate declining
30-day repeat purchase rate fell 7 points. No alert, no action.
Root Cause
The business measured success with a simplified LTV formula that overestimated value and ignored the growing gap between what customers were worth and what was paid to acquire them. The model worked when CAC was low. When CAC doubled, the same formula produced a false confidence.
"
An LTV number that does not include returns, discounts, and cohort decay is not a number. It is a story you are telling yourself.
Case Conclusion
LTV Miscalculation
Problem
LTV calculated incorrectly — overstated by ~40% due to excluded returns and simplified formula.
Cause
No cohort-level LTV tracking. Business relied on blended average that masked channel decay.
Action
Monthly cohort LTV by acquisition channel. LTV:CAC ratio as primary acquisition metric.
Investigator's Takeaway
The business thought it knew what a customer was worth. The number was wrong by 40%. Every acquisition decision for 12 months was made on bad math. Fixing the formula does not fix the year — but it fixes the next one.
If you have never run a cohort-level LTV:CAC analysis, you are operating on assumptions. Let's fix the measurement.
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