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2 Metrics to Better Understand Your Customer Acquisition Cost and Lifetime Value

Posted on February 17, 2015 by Glenn Gow

Lead purchasing and advertising are popular methods to build a corporate marketing funnel. But how effective are they, and how do they compare with other demand generation methods? To determine the answer, says Greg Head, CMO of leading email marketing and sales platform Infusionsoft, you must first arrive at a true understanding of both your Cost of Acquisition of a Customer (CAC) and the Lifetime Value of a Customer (LTV).

Using well-developed CAC and LTV values together not only greatly increases the efficacy of your demand generation efforts, but it also unlocks valuable insights into product development, targeting, segmentation, retention, operations and service. In this Moneyball for Marketing podcast, Greg gives us a deep dive through the world of CAC and LTV to learn the following:

Acquisition Aptitude: Greg shares in detail the definitions of CAC and LTV that Infusionsoft uses to inform its corporate marketing, including the concepts of “simple CAC,” “fully loaded CAC”, “marginal CAC” and “channel CAC.” He demonstrates how any business can calculate LTV and CAC, regardless of product or service.

Buyer Bias: Not all customers are created equal. A buyer acquired at a high CAC who has a low LTV is not your ideal target. Greg shares his method for segmenting customers and conducting demographic, psychographic and behavioral research to determine ideal buyers and what they respond to. He then reveals why the demand generation tactics you think perform best now may in fact be all wrong.

People Power: To determine the ideal configuration of corporate marketing channels, products, features and services, first look at what decreases CAC and increases LTV. The ability to calibrate efforts and decisions based on these metrics puts immense leverage in the hands of your corporate marketing team, while reducing your demand generation spend. Greg shares his formula. 

Greg Head is the CMO of Infusionsoft. Infusionsoft offers an email marketing and sales platform for small businesses including products to streamline the customer lifecycle, customer relationship management, marketing automation, lead capture and e-commerce. Greg oversees the company’s marketing strategy, communications, and other partner programs. 
 
Read the full transcript here

Glenn Gow

Glenn Gow is an expert in marketing performance, Coach, Board Advisor, Author, Speaker, Podcast Host and Founder & Advisor of Crimson Marketing. Follow me on TwitterLinkedInGoogle+. To get a free copy of Crimson’s One-Page Marketing Metrics Funnel, visit here.


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