We usually know the characteristics of our ideal client , but do we know how much it costs the company to acquire a new client? Or what economic value a client brings to the company? We must never forget that each client represents an investment, so it is important to know where to invest our money and efforts to obtain the maximum return.
Customer Acquisition Cost (CAC)
It is the primary metric for understanding the profitability of your company, as it tells us how much money we have invested to attract a customer.
How is CAC calculated?
Once you have all this data, you can start calculating the CAC with the following formula:
Sales and Marketing Expenses / New Customers = CAC
It is very important that when applying this formula you have quality data and that you define a period when making the calculation (quarterly, monthly, etc.)
Customer life cycle or Lifetime Value of a Customer (LTV)
The customer lifecycle helps us measure profitability by showing us the net revenue a customer generates for us during the time they work with us.
How do we calculate LTV? It collects information on the following data: average value of the sale you get from each customer, number of times a customer buys from you during a given period (transactions) and average list of australia whatsapp phone numbers retention time (average time a customer works with you)
Why are these two metrics so important?
Because if the cost of organic traffic drop: a guide to possible causes acquiring a customer is greater than what the customer brings in, big work then your business isn’t making money.
Knowing and applying metrics such as CAC and LTV is something that seems obvious, but in practice few companies carry it out, or do not know how to calculate it, so here we share a complete guide of metrics that will help you know if your model is bringing you benefits.