Key Growth Metrics, Part 2: CLV/LTV, and CAC (SaaS)

I wrote this blog post as part of blog series on growth and marketing. See more here: Growth Map: The Missing Guide That Connects Marketing Strategy, Research, and Campaigns.

Managing a business is a little bit like flying an airplane. Keep your eyes on the speed, altitude, drag, and fuel and you’ll get to your destination fast. Try flying blind and you’ll crash and burn.

Who Should Read This

Startup founders, marketing managers, and growth hackers who are new to the growth game. Anyone who’d like to understand basic business metrics tech startups use. Here is why you might care:

  • You’d like to grow your business faster and understand the highest-leverage areas to focus on
  • You’d like to evaluate performance of your marketing
  • You’re raising a new round and want to be ready for the questions VCs are going to ask

So, let’s dive right in.

What We’ll Cover

Last time we focused on user growth. We looked into acquisition, retention, and virality metrics, as well as interactions among these three. Today, we’ll assess the dollar impact one user has on our business. To do it, we’ll learn to calculate and use another metric: customer lifetime value.

Summary (TL;DR)

  • Customer Lifetime Value (CLV) = dollar value a company can earn from serving one customer.
  • Retention ↑ => CLV ↑
  • Price ↑ => CLV ↑
  • Discount rate ↑ => CLV↓

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Key Growth Metrics, Part 1: Churn/Retention, and Virality (SaaS)

I wrote this blog post as part of blog series on growth and marketing. See more here: Growth Map: The Missing Guide That Connects Marketing Strategy, Research, and Campaigns.

Managing a business is a little bit like flying an airplane. Keep your eyes on the speed, altitude, drag, and fuel and you’ll get to your destination fast. Try flying blind and you’ll crash and burn.

Who Should Read This

Startup founders, marketing managers, and growth hackers who are new to the growth game. Anyone who’d like to understand basic business metrics tech startups use. Here is why you might care:

  • You’d like to grow your business faster and understand the highest-leverage areas to focus on
  • You’d like to evaluate performance of your marketing
  • You’re raising a new round and want to be ready for the questions VCs are going to ask

So, let’s dive right in.

What We’ll Cover

First, we’ll focus on user growth. Here we’ll look into acquisition, retention, and virality metrics, as well as interactions among these three.

Second, we’ll focus on the monetary value associated with users. Here we’ll look into customer lifetime value and customer acquisition cost.

Summary (TL;DR)

  • There are multiple variables that will define business growth dynamics
  • Main ones are acquisition rate, retention rate, and virality coefficient
  • At any given time you might choose to prioritize some of these metrics over others
  • This decision will depend on the business strategy, available resources, customer feedback, stage of the product lifecycle, and hundreds of other factors
  • Models like the one shown here can assist you in making better decisions by letting you see where your business will be at in the future under different scenarios

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