Once you’ve calculated CLV, you can use it to determine your target customer acquisition cost (CAC). Instead of simply targeting customers that bring in high initial revenue, focus your acquisition efforts on high CLV customers. Even if their first purchase is small, they will bring your business more value in the future.
A customer acquisition is unprofitably only if CAC exceeds CLV. For most businesses, your CLV to CAC ratio should be 3:1 for each marketing segment. If you spend too much (e.g. 1:1 ratio), acquiring those customers won’t be profitable. But if you spend too little (e.g. 7:1 ratio), you will be missing out on profitable customers whose acquisition cost is above your current bid cap.