How to Use Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV)
Four tips to turn data into insights
Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV) are two of the most basic metrics a business can track as it relates to customer revenue. That being said, I’m continually surprised by how many companies do not explicitly use these labels as well as how many use the labels, but don’t do anything with the data.
In this article, we’ll introduce CAC and CLV. There’s a chance your organization may not highlight these values; however, I can near guarantee you they have the data readily available. Afterwards, we’ll go over some basic ways to operationalize CAC and CLV.
What are CAC and CLV?
We’ll quickly go over what each of these values are and how they are calculated.
Customer Acquisition Cost (CAC)
CAC is a pretty simple concept. For a given period of time, take the dollars put into acquiring new customers and divide by the number of customers acquired. What counts as a cost for acquiring new customers? Generally that’s the cost of your sales and marketing teams including compensation, tools, and services.
