Marketing Payback Period
Marketing Payback Period is the number of months it takes for a new customer's cumulative contribution margin to equal the cost to acquire them (CAC). It is a measure of liquidity risk. A shorter payback period frees up cash to be reinvested in growth faster.
The Short Version
How long until I get my money back?
Prerequisites
The Infinite LTV Trap
You have high LTV, so you spend aggressively. But the payback is 24 months.
You run out of cash in month 6. You die before you ever see that high LTV. Payback period measures survival.
How it works
Month 1 Margin + Month 2 Margin... until Sum >= CAC
Track Cumulative Net Income per cohort
Common Misconceptions
Calculating payback on Revenue instead of Margin
Ignoring Churn in the payback calculation
Assuming you have infinite runway to wait for returns
Related Terms
Frequently Asked Questions
QWhat is a good payback period?
For SaaS: 12 months is standard. For DTC/Ecom: First order payback is ideal, but 60-90 days is acceptable for high-repeat businesses.