Your CAC is lying to you: Why CLV Is the only metric that matters

Unmasking CAC’s Deception: Why Customer Lifetime Value is the True Metric for Brand Success

Francesca Gargaglia, Co-founder & CEO of social.plus, addressed the retail industry’s intense focus on customer acquisition. Executives often measure success by new customer numbers, a trend fueled by decades of investment in paid media and influencers to secure initial transactions. However, this strategy frequently overlooks post-purchase engagement, leading to a critical issue: 60% to 70% of first-time shoppers never return.

This high churn was previously ignored due to cheap paid media and strong conversion rates. Acquisition-focused growth playbooks seemed effective, but the market has fundamentally shifted, rendering this approach unsustainable. Customer acquisition costs (CAC) have dramatically increased by 60% to 70% in five years, while retention rates decline. Companies still allocate 85% of their marketing budget to acquisition and only 15% to retention.

Ms. Gargaglia critically termed this imbalance “obsessing over the first date and forgetting the relationship.” She argued this approach is unsustainable and urged a strategic pivot towards customer retention. Brands should focus on convincing customers to stay, rather than just to buy. In this new paradigm, Customer Lifetime Value (CLV) emerges as the crucial metric.

Unlike CAC, CLV can grow significantly over time through sustained investment in the customer relationship, fostering enduring loyalty and value. Ms. Gargaglia provided compelling examples of brands successfully prioritizing CLV, demonstrating how fostering engagement creates lasting value beyond initial transactions.

Nike’s Running app builds community around shared passions, transcending mere shoe sales. Starbucks’ loyalty app transforms coffee consumption into a daily ritual, generating unparalleled customer loyalty through consistent engagement. Ulta Beauty also created an in-app community where beauty enthusiasts connect, leading to increased purchase frequency and doubled average basket values.

The proposed playbook is “Engage, Understand, Monetize.” Brands must invest in platforms allowing consumers to connect safely on owned channels. This enables the collection of first-party data, deep understanding of consumer needs, and the development of hyper-personalized campaigns, driving revenue growth and strengthening customer relationships effectively.

In the era of AI-generated content, authenticity is increasingly scarce and highly coveted. Social media platforms, now entertainment-focused, no longer serve as genuine community spaces. This presents a significant opportunity for brands to fill this authenticity gap by providing dedicated, safe environments for consumers to discuss shared interests and beliefs, fostering real connections.

Ms. Gargaglia concluded that brands shifting from “chasing clicks” to “chasing connections” will be the long-term winners. Investing in customer relationships consistently yields a positive return on investment, proving to be the most effective strategy for sustainable growth and building enduring brand loyalty in today’s competitive market landscape.