Skip to main content
UploadLanguage (EN)Support
BusinessMobileSocial MediaMarketingTechnologyArt & PhotosCareerDesignEducationPresentations & Public SpeakingGovernment & NonprofitHealthcareInternetLawLeadership & ManagementAutomotiveEngineeringSoftwareRecruiting & HRRetailSalesServicesScienceSmall Business & EntrepreneurshipFoodEnvironmentEconomy & FinanceData & AnalyticsInvestor RelationsSportsSpiritualNews & PoliticsTravelSelf ImprovementReal EstateEntertainment & HumorHealth & MedicineDevices & HardwareLifestyle
Uploaded byjessemarble
PPTX, PDF651 views

How to Measure and Use Lifetime Value and Customer Acquisition Cost

The document discusses the importance of measuring Marketing Value through Customer Lifetime Value (LTV) and Customer Acquisition Cost (CAC), emphasizing that retaining existing customers is significantly more cost-effective than acquiring new ones. It outlines strategies for improving the LTV:CAC ratio, including focusing on retention, upselling, and understanding the sales and marketing cost structure. The document also provides a formula for calculating LTV and CAC, as well as tips for tweaking marketing strategies to enhance profitability.

Marketing◦
Related topics:
Customer Service Insights•Enhancing Customer Experience•
Downloaded 12 times
Measuring Marketing Value: Lifetime Value (LTV)
ME =
4 Lifetime Value (LTV) Customer Acquisition Cost (CAC)
TODAY 5 THEORY PRACTICE
MY JOURNEY WITH LTV-CAC 6
CAVEATS 7  We want to be great marketers (growers)  How to lead, even when not in leadership  Data is important  Our context
HOW DO WE GROW? 8
HOW DO WE GROW? 9 GET NEW ONES KEEP CURRENT ONES 1 2
HOW DO WE GROW? 10 GET NEW ONES KEEP CURRENT ONES 1 2 LTV HELPS WITH BOTH
11 5x-9x more costly to acquire new customer vs. retain existing
12SOURCE: https://www.helpscout.net/75-customer-service-facts-quotes-statistics/
13 It takes 12 positive interactions to make up for one unresolved negative experience = SOURCE: https://www.helpscout.net/75-customer-service-facts-quotes-statistics/
14 9% 70% 91% of unhappy customers will not willingly do business with you again. Resolve a complaint in the customer's favor and they will do business with you again 70% of the time. START SOURCE: https://www.helpscout.net/75-customer-service-facts-quotes-statistics/
15 Americans tell an average of 9 people about good experiences, and tell 16 people about poor experiences. vs. SOURCE: https://www.helpscout.net/75-customer-service-facts-quotes-statistics/
16
17 Lifetime Value (LTV) • What’s the value that this customer brings? • Long-term view of customers • “Average deal size” if one-time • How can companies with inexpensive products justify big marketing budgets?
https://blog.kissmetrics.com/how-to- calculate-lifetime-value/
SOURCE: https://blog.kissmetrics.com/how-to- calculate-lifetime-value/
20 Lifetime Value (LTV) • Simple LTV = Total revenue from client • Traditional LTV = (Avg. gross margin) x (Customer retention rate / (1 + Discount rate - Customer retention rate)
21 Lifetime Value (LTV) • Simple LTV = Total revenue from client • Traditional LTV = (Avg. gross margin) x (Customer retention rate / (1 + Discount rate - Customer retention rate) • Gross margin not revenue • Churn matters • “Bird in the hand is worth two in the bush”
22 Customer Acquisition Cost (CAC) • (Sales + Marketing + hard costs) / number of deals acquired • Does *not* factor in overhead, delivery, support (operating expenses)
23 The Magic Formula – LTV:CAC EXAMPLE LTV = $25,000 CAC = $6,000 LTV:CAC = 4.2
24 The Magic Formula 3 : 1 healthy 5+ : 1 leaving $ on the table 1:1 spending too much Recover CAC in 12 months
WHAT NOW? 25
By: • product offering 1) Know Thy Magic Formula
By: • product offering • target market / vertical 1) Know Thy Magic Formula
By: • product offering • target market / vertical • acquisition channel 1) Know Thy Magic Formula
By: • product offering • target market / vertical • acquisition channel • sales person 1) Know Thy Magic Formula
By: • product offering • target market / vertical • acquisition channel • sales person • account manager 1) Know Thy Magic Formula
By: • product offering • target market / vertical • acquisition channel • sales person • account manager • marketing campaign 1) Know Thy Magic Formula
By: • product offering • target market / vertical • acquisition channel • sales person • account manager • marketing campaign • buyer persona 1) Know Thy Magic Formula
 Win the games you need to win  Focus on retention strategies  Thoughtful upsell 2) Increase LTV over time
+ Channel + Strategic Partnerships + Expectation setting early + Online Self-service + Surprise and delight - Low Customer Satisfaction - High Churn Rates 2) Increase LTV over time
 Know how to decrease CAC  Get close to 5:1  Invest 3) Trampoline your ratio
3) Trampoline your ratio  Know how to decrease CAC  Get close to 5:1  Invest 5:1 1:1
3) Trampoline your ratio 5:1 1:1  Know how to decrease CAC  Get close to 5:1  Invest
3) Trampoline your ratio 5:1 1:1  Know how to decrease CAC  Get close to 5:1  Invest
4) Grow! THE CUBE MODEL GET NEW ONES1
40 CAC LTV 1) Add more blocks with healthy unit economics
1) Add more blocks with healthy unit economics 2) In a market with lots of blocks
4) Combine CAC with sales metrics to reverse-engineer marketing budgets CAC = $6,000 Close rate = 33% Qualified leads = $2,000 each Qualification rate = 20% Cost per lead = $400 Web conversion rate = 5% Web traffic = $20/visitor What channels, strategies, content can drive leads for $400/each? $20 web visitors?
5) Sales forecasting / quotas CAC = $6,000 Sales Salary = $6,000 =Close one deal per month LTV:CAC Ratio = 5:1 They ask: “Can we do XYZ?” Because ratio is healthy: clear YES!
6) Team forecasting Pipeline = 4 new customers LTV = $25k Total new value = $100k ? Staffing ? Support ? Overhead/infrastructure
7) Find more of the right clients MY VAMPIRE MATRIX
KNOW THY MAGIC FORMULA
jesse@magneti.com /in/jessemarble /jessemarble