Lifetime Value: Customer Acquisition Cost (LTV:CAC)
Measure the relationship between the lifetime value of a customer and the cost of acquiring that customer.
Overview
The Lifetime Value:Customer Acquisition Cost metric is by far one of the most key metrics to monitor for your business. Tracking the total value of a single customer and comparing it to the cost of acquiring them gives you insight into how effective your spending is, while also giving you the data to justify your customer acquisition spend.
Formula
Gross Margin % X ( 1 / Monthly Churn ) X Avg. Monthly Subscription Revenue per Customer : Sales and Marketing Costs / New Customers Won
Reporting frequency
Monthly
Example of KPI target
3:1
Audience
CEO, CMO, Marketing Manager, Sales Manager
Variations
CAC:LTV
