Deciphering Customer Acquisition Cost and Customer Lifetime Value

Running a business can be overwhelming with all kinds of chores, and analyzing data may just be done in your spare time. You may be familiar with some digital marketing metrics such as click-through rate (CTR), cost-per-click (CPC), and conversion rate (CVR) . But it’s easy to overlook two important metrics customer acquisition cost (CAC) and customer lifetime value (CLV) .

If you want to be successful in digital marketing, you must understand customer acquisition cost (CAC) and customer lifetime value (CLV). This better evaluates whether your paid search advertising is profitable. In this article, you can find out what these metrics mean and how to use them for your digital marketing.

What exactly is customer acquisition cost CAC

Simply put, acquisition cost is what a company spends to convert potential customers into actual customers. Similar to cost-per-acquisition (CPA) for paid advertising, but there’s a big difference between the two. Cost per Jamaica Mobile Number List acquisition (CPA) is a digital marketing metric, while customer acquisition cost is more relative to the financial picture.

Customer acquisition cost (CAC) includes the total acquisition cost of using various online and offline marketing efforts, such as billboards, media publishing ads, Google ads combined.

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Here is the formula for calculating customer acquisition cost (CAC)

Often, different marketing channels bring you different amounts of revenue. Therefore, it is unreasonable to include them in the total marketing expenses. You should calculate the customer acquisition cost of different channels separately to filter the most effective marketing channels and increase investment.

Here is a calculation of the cost of customer acquisition:

  • Paid advertising cost per new passenger flow: 60 yuan
  • Get new traffic: 10
  • Conversion rate: 10%

Total customer acquisition cost: 600 yuan + other non-paid advertising and marketing costs

And so on, if you know how the cost of customer acquisition is calculat. You can easily calculate the cost of acquisition within a reasonable range.

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