Customer acquisition costs keep rising. Margins get tighter. And yet, many marketers still obsess over the same metrics they’ve used for years.
It’s easy to freak out when you see you’ve acquired a customer for $50, but the service they bought only costs $60. That’s a 1.2X return on ad spend, which looks terrible on paper. But what that single transaction view doesn’t tell you is that this same customer might come back three, four, five, or six times.
Take a hair salon, for instance. If we only ever gauged success based on ROAS from the first appointment, our figures would always look unhealthy. But when we start taking into account what customers bought that first time plus everything they purchase the year after, the picture looks a heck of a lot better.
Why Customer Lifetime Value Changes Everything
Customer lifetime value (CLV) is one of the first metrics we look for when starting work with a business. Understanding how long customers stick around or how likely they are to repurchase completely transforms how we evaluate campaign performance.
What we always try to do is identify the average customer lifetime value and then look at that in context to cost per acquisition for new customers. This gives us a much more accurate picture of what we can afford to spend on acquisition.
The other crucial angle is comparing the cost of acquiring new customers versus reactivating existing ones. If your cost to reengage an existing customer is especially high, that’s a red flag you want to watch for.
Not All Industries Are Created Equal
While CLV is vital for most businesses, there are exceptions. For example, for wedding venues, car dealerships, or divorce lawyers, the purchase is mostly one-and-done. In these cases, focusing on profit margins rather than lifetime value makes more sense.
But for gyms, hair salons, wellness services, subscription businesses, and most B2B companies, lifetime value is absolutely critical. It’s one reason B2B has such high acquisition costs. They know a new client might stick around for years, making that initial investment worthwhile.
E-commerce falls somewhere in between. You need to look at how often people purchase and what the average value of those purchases are. If you’ve got a referral program, tracking that value back to the original acquisition can be really useful too.
Traditional Metrics Still Matter, But in Context
I do think click-through rate still plays a part because it gauges how effectively your ads speak to what people are looking for. It shows how well you’re resonating with potential customers through your copy.
Conversion rate optimisation is another big one. I’d much rather get the same amount of traffic but more conversions than have to get more traffic to get more conversions. Efficiency matters.
What’s Next?
The marketing landscape has changed. Customer acquisition costs continue to rise, and the old ways of measuring success don’t tell the full story anymore. By shifting focus from immediate ROAS to long-term customer value, you’ll make better decisions that drive sustainable growth. It’s not about short-term wins. It’s about building a business that thrives for years to come.