Why payback guardrails matter
Discounts and packaging changes can quietly destroy payback. Guardrails convert a target payback into a minimum ARPA (or a maximum discount) so pricing decisions don't break your cash model.
Core relationship
Payback ~ CAC / (ARPA*margin). Rearranging gives min ARPA and max discount allowed for a payback target.
How to use it
- Set guardrails by segment (plan, channel, region) rather than a blended average.
- Pair payback guardrails with retention risk checks (churn sensitivity).
- Use in discount approval workflows to prevent out-of-policy deals.
Common mistakes
- Using revenue instead of gross profit (margin).
- Ignoring churn changes from pricing changes.
- Using one guardrail for all segments despite different CAC and ARPA.