Customer Acquisition Cost Ratio Calculator

Calculate the Customer Acquisition Cost (CAC) Ratio to evaluate the efficiency of customer acquisition by comparing customer lifetime value (CLV) to customer acquisition cost (CAC).

Standard
Step by Step
Chart

Result

Calculation Steps

CLV-CAC Breakdown

Formulas

Customer Acquisition Cost Ratio Calculation

The Customer Acquisition Cost (CAC) Ratio is calculated as follows:

CAC Ratio = CLV ÷ CAC

Where:

  • CAC Ratio: Customer Acquisition Cost Ratio
  • CLV: Customer Lifetime Value ($)
  • CAC: Customer Acquisition Cost ($)

Usage Notes:

  • Results are rounded to 2 decimal places.
  • Customer acquisition cost must be greater than 0.
  • A CAC Ratio greater than 1 indicates that customer lifetime value exceeds acquisition costs, suggesting a viable acquisition strategy.

How to Use the Customer Acquisition Cost Ratio Calculator

  1. Enter Customer Lifetime Value: Input the estimated total revenue or value a customer will generate over their lifetime (e.g., subscriptions, purchases).
  2. Enter Customer Acquisition Cost: Input the total cost associated with acquiring a customer (e.g., marketing, sales expenses).
  3. Choose Display: Select standard, step-by-step, or chart view.
  4. Calculate: Click “Calculate” to process inputs.
  5. View Results: Review the CAC ratio.
  6. Reset: Click “Reset” to clear fields.

Frequently Asked Questions (FAQs)

What is the Customer Acquisition Cost (CAC) Ratio?

The CAC Ratio is a financial metric that compares the customer lifetime value (CLV) to the customer acquisition cost (CAC), indicating the efficiency of customer acquisition efforts.

How is the CAC Ratio calculated?

The CAC Ratio is calculated by dividing the customer lifetime value (CLV) by the customer acquisition cost (CAC): CAC Ratio = CLV ÷ CAC.

What is a good CAC Ratio?

A CAC Ratio greater than 1 indicates that the lifetime value of a customer exceeds the cost to acquire them, suggesting a sustainable acquisition strategy. A ratio less than 1 suggests costs outweigh value, and a ratio equal to 1 indicates a break-even point. Common benchmarks suggest a CAC Ratio of 3:1 or higher for healthy businesses.

Why is the CAC Ratio important?

The CAC Ratio helps businesses evaluate the efficiency of their marketing and sales strategies, aiding in budget allocation and long-term profitability planning.

Can CLV or CAC be negative?

CLV and CAC should be non-negative for meaningful calculations. Negative values may indicate data entry errors or non-viable acquisition strategies.