The basics of any business are to know your acquisition costs and the expected revenues from a customer.
What is CAC?
CAC — Customer Acquisition Cost is the cost of acquiring a single customer using marketing channels. Eg if you have spent PKR 1500 on facebook ads and acquired 10 customers due to it your
CAC is PKR 1500 / 10 = PKR150 / customer
What is LTV?
LTV — Long Term Value is the revenue you would generate from a customer’s lifetime. Eg if a customer spends an average of PKR 2000 / visit and on average in a 12 month period you are able to keep 90% of your acquired customers coming back.
LTV = PKR 2000 / (1–0.9) = PKR 20,000 / Customer
The graphic above shows you how to use CAC & LTV figures
Customer Story
MSL's service and administration has been helping our customers in calculating and gaining an understanding of CAC & LTV. We aim to educate all incoming new customers of best business practices and new ideas on how to target and acquire new customers. One such customer who is putting into action these metrics is Kolachi Meals who is using CAC & LTV figures to select the best marketing channels for individual customer types.
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