What is the CLV and CAC formula?
An example of an AI chatbot conversation about customer lifetime value and customer acquisition cost formulas.
Can you explain the CLV and CAC formulas?
Sure! CLV stands for Customer Lifetime Value, which estimates the total revenue a customer will generate during their relationship with a business. CAC stands for Customer Acquisition Cost, which is the cost associated with acquiring a new customer.
How do I calculate CLV?
To calculate CLV, you can use the formula: CLV = (Average Purchase Value) x (Average Purchase Frequency) x (Customer Lifespan).
And what about CAC?
CAC is calculated by dividing the total costs associated with acquiring new customers (like marketing expenses) by the number of new customers acquired during that period.
Why are these metrics important for my business?
These metrics help you understand the profitability of your customer relationships and the efficiency of your marketing efforts, guiding strategic decisions.
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