Today, I read an article explaining about Customer Acquisition Costs and Lifetime Value of a Customer. So I thought of sharing the definition of these terms that I understood.
Whats Is Customer Acquisition Costs ?
It is defined as the cost spent to acquire or get a customer to your business. In general, acquiring the customer involves giving your service (say, selling a product). You may have to spend money to get new customers (that’s one of the way) by means of advertising. But as a means of measuring this you have to find out, how much money that you spent to get one customer. There comes the customer acquisition cost.
Say, you are spending 1000$ to get 10 customers then Customer Acquisition Cost is 100$ per customer. For your business to gain profit, your customer has to buy products from you for more than 100$. So it all depends on how far you are utilizing the customer for your business ?
What Is Lifetime Value Of Customer ?
It is defined as the revenue generated from an acquired customer for the lifetime. Once you acquired the customer, it all depends how you are devising the customer into repeat customer. What drives to make him repeat customer ? Its a simple answer, Quality service. Yes, when your business serves quality service or quality product you shall gain and hold the customers for the lifetime.
Say, you got a customer for 100$ and for the first time you are generating a revenue of 120$ from him. When that customer likes your service & he comes back again. This time you are making another sale for 120$ that means you gained 120+50 = 170$ from a single customer as profit. As said earlier, it all depends how you are devising a customer into repeat customer.
So as a business, you have to maintain the value of a customer high and customer acquisition cost as low in order to gain profits for your lifetime. The quality of your business plays major role in deciding this trend.
I would like to thank Sitepronews.com for creating an awareness through their article (Track And Measure Your Advertising, Customer Acquisition Costs, And The Lifetime Value Of A Customer).