Customer acquisition cost payback (CAC)
Winning a customer costs money in advertising, sales staff or discounts. Check how long they take to repay it with what they leave each month, and whether they stay long enough.
You recover acquisition cost in
—
Monthly contribution
—
Customer value
—
Recovered over their lifetime
—
Lifetime contribution ÷ acquisition cost
—
How it is calculated
- Monthly contribution = what the customer pays per month − what it costs to serve them.
- Months to recover = acquisition cost ÷ monthly contribution.
- Customer value = monthly contribution × months they stay − acquisition cost.
Assumptions
- Constant monthly fee and costs.
- No discounting for the time value of money.