Subscription Scorecard Metric Deep Dive: Customer Lifetime Value and Customer Acquisition Cost
At the heart of understanding your relationship with customers are two key metrics that should be evaluated together: customer lifetime value (CLTV) and customer acquisition cost (CAC). This article explores how CLTV and CAC provide even greater insight than when used individually. This article outlines the purpose of these two metrics, highlights various ways each can be calculated, and provides examples of real world applications.
However, it is also important to note these specific calculation approaches illustrated here with examples will depend on a given company's operating model, strategy, maturity, and structure. Furthermore, additional insights can be uncovered by performing these calculations by segment, whether it be cohort, product, geography, or some other logical segmentation for your business. These insights are not only useful in explaining your business and breaking down your current model and status, they are also powerful in informing future decisions.