On this week’s SBI Insider Video Podcast we discuss how sales, marketing and product functional leaders can elevate the strategic discussion. The two most underutilized metrics that drive shareholder value are Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLTV).
Championing CAC and CLTV will lead to the right strategy discussions that impact shareholder value the most. This elevated conversation will result in being viewed as a strategic partner by your CEO and board. Why does the CEO care? You’ll be in a position to fine tune inputs you and the rest of the executive team controls to increase CLTV and decrease CAC to drive more to the bottom line.
It’s difficult to grow revenue faster than your industry’s growth rate and faster than your competitors. The Revenue Growth Diagnostic interactive tool will help you determine if you are likely or unlikely to make your number.
Most companies don’t track Customer Acquisition costs at the right level to make it actionable. CAC is a function of how much is spent (Sales & Marketing) and how many customers are acquired as a result of the spend. Watch my colleague Scott Gruher and I show you how to determine CAC by breaking down the inputs you control representing acquisition cost. We will also walk through the approach to performing activity based costing.
Discussion includes how CLTV is a function of being able to retain your customers longer (lower churn) while extracting more revenue from them in the process (higher per customer revenue). Understanding your Customer Lifetime Value provides insights where you are potentially not allocating people, time, and money correctly. Also, scenarios are discussed to provide use cases of how CLTV impacts your choice of selling channels.
Many sales and marketing leaders get stuck thinking in a silo at the functional goal level. The CAC and CLTV conversation bridges discussion across the functional areas of product, marketing and sales. Watch as my colleague Scott Gruher walks through the steps of creating actionable CAC and CLTV.
Going forward you’ll be in a position to use shareholder value to articulate why you need more resources. Most importantly you’ll be able to back up the impact. This will increase the probability of you making the number and increase overall shareholder value.