The importance of knowing your Customer’s Lifetime Value
When it comes to marketing, a key metric to benchmark is Customer Acquisition Cost (CAC). CAC is calculated by dividing your sales and marketing expenses by the number of net new accounts secured during a given period.
Sales and Marketing Expense / Net New Accounts Secured = CAC
But how do you know if you’re paying too much to acquire a customer?
Calculate the Lifetime Value of a customer
It’s hard to determine if your CAC is appropriate (in other words, are your customers profitable for your organization) without first knowing the Lifetime Value (LTV) of your customers. After you determine the LTV, you can begin to understand How Much You Are Willing to Pay for a Customer.
Try our simple customer Lifetime Value calculator