That's why you should pair CAC with LTV (and why we did above) – it's a measurement of profitability.įor many businesses, this might be very simple – if you sell cars, for instance, people will buy very infrequently and so the total value of that customer is probably just the profit on one car. To build a viable business, your revenue from a customer MUST exceed the money that you spent to acquire that customer. Why customer lifetime value (LTV) is important In our calculator above, you'll see that we've asked you to sum most of the core inputs into the CAC formula, but you could easily split out CAC by channel by dividing the total amount you spent on a single channel by the number of customers it produced. This simple explanation illustrates the customer acquisition cost formula, which looks like this: Spend $100 on PPC and $50 on mailed flyers and end up with two customers? Your CAC is $75 ($150 / two customers). Spend $100 on Facebook to get your first customer? Your CAC is $100. The AMOUNT you'll have to pay, at the most basic level, is your CAC.
Whatever method you choose, you'll have to pay for it (yes. That payment could take any form it could be advertising on Facebook, buying ads through Google AdWords, sending out flyers to peoples' letterboxes or standing on a street corner trying to sign them up. That means getting customers – and usually, you'll have to pay to get those customers. If you've got a product, you need to sell it. Why pay attention to CAC (and how to use the formula) If you want to understand how to do this for yourself (with more accuracy), read on. The CAC calculator above will give you a framework for working out a rough number for your business. And you'll be on a fast-track to success. We can all agree that there are a lot of metrics to measure running ANY business.īut listen, customer acquisition cost (from here, 'CAC,' because let's face it, it's a mouthful.) is one of the most critical metrics out there.įail to understand it, and your business will sink. How does customer acquisition cost (CAC) work?Ī look at some of the principles behind CAC, CLV, LTV and all those other acronyms.
0 kommentar(er)
