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Posted: Wed Jan 22, 2025 6:18 am
Purpose of calculating CAC One of the purposes of calculating CAC is to determine the target LTV value. If you know the LTV, which means the profit per customer, you can know the upper limit you can spend on internet advertising and the acceptable range of CPA, which allows you to choose the appropriate advertisement. The CAC is calculated as follows: CAC = customer acquisition cost over a given period / number of new customers acquired over a given period Additionally, you can also calculate unit economics for your SaaS business.
*SaaS is an abbreviation for "Software as a Service" and refers to a service that allows you to access cloud-based software via the Internet. Unit economics is an indicator of profitability per hong kong telegram data user. If unit economics are positive, the revenue from one customer exceeds the cost of the customer, and it is an indication that the business can continue to make a profit. Here's how to calculate unit economics: Unit Economics = LTV (Customer Lifetime Value) / CAC (Customer Acquisition Cost) CAC Guideline To make your business profitable and continue to make profits, your CAC must be lower than your LTV.
The ideal relationship between LTV and CAC is "LTV should be at least three times the CAC." However, it is not desirable to lower the conversion rate (customer acquisition efficiency) by lowering the CAC, so it is important to use the numbers as a guideline only and sometimes consider additional ways to acquire new customers even if it means increasing costs. Look at the situation of your service and users and consider the balance when making your decision.
*SaaS is an abbreviation for "Software as a Service" and refers to a service that allows you to access cloud-based software via the Internet. Unit economics is an indicator of profitability per hong kong telegram data user. If unit economics are positive, the revenue from one customer exceeds the cost of the customer, and it is an indication that the business can continue to make a profit. Here's how to calculate unit economics: Unit Economics = LTV (Customer Lifetime Value) / CAC (Customer Acquisition Cost) CAC Guideline To make your business profitable and continue to make profits, your CAC must be lower than your LTV.
The ideal relationship between LTV and CAC is "LTV should be at least three times the CAC." However, it is not desirable to lower the conversion rate (customer acquisition efficiency) by lowering the CAC, so it is important to use the numbers as a guideline only and sometimes consider additional ways to acquire new customers even if it means increasing costs. Look at the situation of your service and users and consider the balance when making your decision.