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What is the difference?

CAC vs LTV

Customer Acquisition Cost

Customer Lifetime Value

What is it?

Customer Acquisition Cost (CAC) is the cost a business incurs to acquire a new customer. This includes the fully loaded costs associated with sales and marketing to attract a potential customer and to convince them to purchase, divided across all new customers.

The Customer Lifetime Value (LTV) metric indicates the total revenue a business can reasonably expect from a single customer account. It considers a customer's revenue value and compares that number to the company's predicted customer lifespan. Businesses use this metric to identify their most valuable customer segments.

Formula

ƒ Sum(Sales Costs + Marketing Costs) / Count(New Customers)
ƒ (Average Revenue Per Account) X (1 / Logo Churn Rate) X (Gross Margin %)

Published and updated dates

Date created: Mar 28, 2018

Latest update: Mar 26, 2021

Date created: Mar 28, 2018

Latest update: Sep 27, 2019