What are some examples of CAC vs CLV?
An example of an AI chatbot conversation about customer acquisition cost and customer lifetime value.
Can you explain the difference between CAC and CLV?
Sure! CAC stands for Customer Acquisition Cost, which is the cost associated with acquiring a new customer. CLV, or Customer Lifetime Value, is the total revenue expected from a customer over their entire relationship with a business.
Can you give me an example of each?
Absolutely! For example, if a company spends $1000 on marketing and acquires 10 customers, the CAC is $100. If those customers generate $500 each over their lifetime, the CLV would be $5000.
How do businesses use these metrics?
Businesses use CAC and CLV to assess the profitability of their marketing strategies. A lower CAC compared to CLV indicates a healthy business model.
What should the ideal ratio of CLV to CAC be?
A common benchmark is a CLV to CAC ratio of 3:1, meaning the lifetime value should be three times the acquisition cost.
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