CAC Analysis with LTV

Each customer you reach means a new sale for you, but have you thought about the money you spend on it? Or you just got views but no one bought it, even let’s go a little further, and you start getting clicks, but you still can’t sell, have you ever thought about the cost of these?

If you haven’t thought about it, you should: here’s your real cost

CAC

Customer Acquisition / Acquisition Cost

Here is an example:

In short, to calculate CAC, you add up the costs associated with acquiring new customers (the amount you’ve spent on marketing and sales) and then divide that amount by the number of customers you acquired. This is typically figured for a specific time range, such as a year or a fiscal quarter.

If an organization spent $1,000 on marketing in a year, and it was able to acquire 1,000 new customers, the CAC would be $1 because $1,000 divided by 1,000 customers equals $1 per customer.

On the other hand, if the company brought in 500 customers, their CAC would be twice as high, or $2, because they spent the same amount of money and brought in half the number of new customers.

This formula is pretty simple, but adding up total expenditures can take a lot of factors into account, including the cost of multiple marketing strategies and staff salaries.

Long story short: It represents the cost created for a customer by adding up all the marketing expenditures made to acquire the customer.

The CPL is the most powerful weapon that shows you how cost-effectively you invested in the marketing budget. It helps you to constantly renew your processes for more efficiency and to guide your Digital Marketing strategy.
CPL also helps you to identify which assets are better at converting potential visitors to customers.

LTV

First, let’s see what an ARPU is:

ARPU is a metric that stands for average revenue per user. In short, it’s the average amount of revenue generated by each active user of your app over a given period of time.

While average revenue per user was originally primarily used in the telecom industry, it has become useful for all types of digital businesses, from SaaS providers to social media networks to mobile apps.

In a mobile marketing context, ARPU is similar to lifetime value (LTV). It’s a way to calculate or determine the value of your users, or of groups of users you’ve organized into segments. Whereas LTV measures the value of a user over their entire lifecycle, average revenue per user measures it over a set period of time.

LTV = ARPU x 1/Churn

What you gain through a customer’s relationship with your company
represents estimated income.

LTV is calculated by finding out the average churn and average spend of a user over the course of a specific period to predict their overall spend in an app.

The formula calculates a user’s lifetime value by predicting how much money they’ll make in a set period (the ARPU, or Average Revenue Per User) and by how well they return (1/churn). With this formula, you can attempt to predict how much a user will be worth throughout their time spent on an application.

RFM

The marketing world has moved away from product-oriented work, has understood the importance of the customer, has put the customer in the center and shifted the business in this direction.

Recency: When was the last time the customer made a purchase?
Frequency: How often does the customer buy?
Monetary: How much does the customer spend in total on his purchases?

Let’s use a user shopping data of at least 1,000 people for the results to be meaningful:
➔ User ID,
➔ Last shopping date,
➔ Last shopping amount,
should contain information.

Market segmentation can help you to define and better understand your target audiences and ideal customers. If you’re a marketer, this allows you to identify the right market for your products and then target your marketing more effectively. Similarly, publishers can use market segmentation to offer more precisely targeted advertising options and to customize their content for different audience groups.

Say, for example, you’re a marketer who’s advertising a new brand of dog food. You could split an audience into segments based on whether they have a dog. You could then segment that audience further based on what kind of dog they have, and then show them ads for food formulated for their dog’s breed. A publisher could use this same information to show content about dogs to people who have or like dogs.

Market segmentation allows you to target your content to the right people in the right way, rather than targeting your entire audience with a generic message. This helps you increase the chances of people engaging with your ad or content, resulting in more efficient campaigns and improved return on investment (ROI).

End-to-end analytics and marketing automation

Marketing Automation both helps automate your production process and puts you in a more effective position in your business.
It saves time for you and helps you reach your goals faster.

A simple automated email workflow as an example, it is as follows:
Step 1: Send your audience an invitation to download your latest e-book.
Step 2: Send a “Thank You” email to all people who downloaded your e-book.
Step 3: After a few days, send a follow-up email to the people who downloaded the e-book; Also, present a case study on this topic.
Step 4: Finally, when someone downloads this case study, your sales team will receive a notification and take over the process and continue.

Stay tuned for my article on the J Curve and its importance for this purpose!