How Is User Acquisition Measured?
How much user acquisition costs your company is a key figure to be aware of — as is whether that price is worth it. Two important figures, the customer acquisition cost (CAC) and the customer lifetime value (CLTV), are crucial KPIs to understanding how successful your marketing budget is and whether the investment you’re making is worth it.
There are three ways to understand the impact of user acquisition on your business:
CAC
This formula takes the total of your sales and marketing expenditures on user acquisition and divides that by the number of new customers you’ve acquired. If you spent $25,000 in the previous quarter and gained 33 new customers, your CAC is $25,000 (sales and marketing costs) ÷ 33 (number of new customers) = $757.58.
Total Sales & Marketing Expenses
on User Acquisition / # of New Customers Acquired = CAC
CLTV
This calculation allows you to figure out how much revenue you can expect from new customers over their association with your company. The formula is:
Average Sale x Number of Repeat Sales x Average Customer Life Span = CLTV.
The CLTV should be a bigger number than the CAC — at least three times (or more) larger. If your CLTV is lower than that, it means it isn’t worth it to bring these new customers on board. (Or that your pricing structure needs to be looked at.)
Churn Rate
Your customer churn rate is an indication of how your compan email data is handling customer retention. As mentioned earlier, there are always customers who jump ship for a number of reasons. A few of the most common are outlined below:
Change in financial status
Change in geography or living situation
Unhappiness with the product
Loss of interest in the product (or brand overall)
Loss of interest in the brand overall
Change in life status (i.e., a young family “outgrowing” a brand like Pampers ip addresses email volume and consistency as children age)
There are two formulas here you should pay attention to:
Customer churn rate. This gives a snapshot of how your company is be numbers doing in customer retention. For example, if you’re calculating the customer churn rate for Q2, the formula is:
Number of Customers Lost During Q2 ÷ Total Number of Customers at Start of Q2 = Customer Churn Rate.
