Lifetime Value: Customer Acquisition Cost (LTV: CAC)

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Formula

Gross Margin % x (1/Monthly Churn) x Avg. Monthly Subscription Revenue per Customer: Sales and Marketing Costs/ New Customers Won

What is a Lifetime Value: Customer Acquisition Cost (LTV: CAC)

Lifetime Value with Customer Acquisition Cost is an essential metric for monitoring the operations of your business. In this metric, you will be able to compute the total value of a customer and compare it to the amount of acquiring them. It will help you to check the effectivity of your spending. It can also give you with information for justifying your customer acquisitions spend.

The Benefits of Determining LTV & CAC

LTV: CAC metric can meet challenges on a number of fronts, especially if you are trying to point acquisition costs to customer segments or individual accounts. Adding up sales and marketing costs on a specific time can be misleading to CAC perspective. Usually, sales resources and marketing are not mainly focused on new customer acquisition.

If you want to monitor real-time LTV: CAC, you can use SaaS Dashboard. If you optimize the cost to recover your CAC through integration costs or mandatory training, you can get more profits.

Marketing Roles

C-Level, VP/ Director

Variations

CAC: LTV

In this metric, the KPI target sample is 3:1. The metric can be calculated by dividing the LTV by CAC. It is also considered as the signal of customer profitability as well as sales marketing efficiency.

Target Audience

CMO, CEO, Sales Manager, Marketing Manager

Digital Marketing KPI Examples