Episode 677

full
Published on:

7th Mar 2025

(Replay) New Customer Acquisition: How Much Can You Afford to Pay?

How much can you really afford to pay for a new customer? The answer isn’t as simple as your Facebook ad spend. In this episode, Ralph Burns and Amanda Powell break down customer acquisition cost (CAC) and customer lifetime value (CLV) to uncover what businesses should actually be spending to scale profitably. They discuss how marketing costs go beyond ad spend, why your marketing team and operational expenses matter in CAC calculations, and how to use a 3:1 CLV-to-CAC ratio as a benchmark for growth. If you’re struggling with ad budgets, profitability, or scaling your business, this episode is a must-listen.

Chapters:

  • 00:00:00 - Welcome to the Episode: How Much Should You Pay for a Customer?
  • 00:00:44 - Why Knowing Your Customer Acquisition Cost (CAC) is Crucial
  • 00:06:20 - The Simple Formula for Calculating Customer Lifetime Value (CLV)
  • 00:08:15 - How to Calculate CLV Using a Basic Formula
  • 00:10:45 - Breaking Down CLV for Different Business Models
  • 00:12:10 - How Long Does It Take to Earn Your CLV?
  • 00:14:50 - Fast vs. Slow CLV Payback Periods & What They Mean
  • 00:17:54 - Transition to Determining Customer Acquisition Cost (CAC)
  • 00:26:40 - Finding the Right Balance Between CLV and CAC for Growth
  • 00:29:52 - Key Takeaways: The 3:1 Rule for Scaling Profitably

LINKS AND RESOURCES:

Thanks so much for joining us this week. Want to subscribe to Perpetual Traffic? Have some feedback you’d like to share? Connect with us on iTunes and leave us a review!

Next Episode All Episodes Previous Episode

Listen for free

Show artwork for Perpetual Traffic

About the Podcast

Perpetual Traffic
Helping marketing directors and CMOs master paid traffic and conversions!
Perpetual Traffic is a twice weekly podcast that shares cutting-edge strategies on acquiring leads and sales for your business. The show is produced by Tier 11 and hosted by Ralph Burns and Lauren Petrullo. Traffic is the act of putting your product, service, or message in front of your target audience…it’s the act of acquiring customers online while also building goodwill, and is the lifeline of any business. So, whether you’re a media buyer yet to create your first Facebook or Instagram ad, a Director of Marketing or CMO managing a team of marketing specialists, or a CEO growing your business on your own, you’ll discover actionable strategies that can be applied today. Perpetual Traffic combines the traffic strategies developed at Tier 11 with the real-life agency experience of the hosts. Listen to real stories of business owners and marketing executives just like you how they overcame struggles with digital marketing and online advertising. Learn how to make Facebook advertising, Instagram advertising, YouTube advertising, Twitter advertising, Google AdWords advertising, LinkedIn advertising, (and more) work for your business.

About your host

Profile picture for Kasim Aslam

Kasim Aslam