Customer lifetime value (CLV) is the counterpart to CAC: what does a customer bring in over the entire relationship? Multiply the annual contribution margin per customer by the average retention period and subtract the acquisition cost, and you see the net value of a new customer at a glance.
What matters is the CLV/CAC ratio. A proven rule of thumb: if CLV/CAC is below 3, the gap between acquisition cost and customer value is tight — small fluctuations in margin or retention period tip the calculation. From a factor of 5, growth through acquisition becomes truly sustainable.
Levers for increasing CLV are in most cases more effective than levers for reducing CAC: cross-selling, contract terms, service quality in the first 90 days, repeat purchase frequency. Those who work on customer value win strategically — those who only work on CAC win tactically.