If your Customer Acquisition Cost (CAC) is high but the customer still has remaining Lifetime Value (LTV), there can be a point where firing (ending the relationship with) the customer is not beneficial, because you can still extract more value from them over time.
Let’s present this scenario mathematically, using
+ and
– to represent value added or lost:
Math Representation
Scenario:
You have already acquired a customer at a high CAC, and their LTV is still ongoing.
Let’s break it down:
- Current status:
- CAC: Already paid (sunk cost)
- LTV: Still generating profit
Decision:
- Keep the customer (+):
- + Additional revenue and profit from ongoing relationship
- – Ongoing costs to serve (but typically less than initial CAC)
- Fire the customer (–):
- – Lose all future revenue and profit from that customer
- + Avoid future service costs, but this is usually much less than the lost LTV
Simplified Formula
For a customer already acquired:
Decision Value=(Remaining LTV−Future Service Costs)−(CAC already sunk)Decision Value=(Remaining LTV−Future Service Costs)−(CAC already sunk)
But since the CAC is already paid (sunk cost), the real decision is:
Keep Customer:+(Remaining LTV−Future Service Costs)Keep Customer:+(Remaining LTV−Future Service Costs)Fire Customer:−(Remaining LTV)Fire Customer:−(Remaining LTV)
Conclusion
As long as the remaining LTV (minus ongoing service costs) is positive, it is generally not beneficial to fire the customer—even if the CAC was high. You are better off continuing to "squeeze" more value out of the relationship, unless other factors (like negative brand impact or excessive support costs) outweigh the financial benefit.
casp their algo says that it's not worth to fire that customer just yet, and it says you on the other hand are disposable
