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FitNow is a mobile fitness app that initially struggled with low conversion rates from free to premium users despite rapid growth. By implementing strategies to lower Customer Acquisition Cost (CAC) and boost Customer Lifetime Value (CLV), the app improved its metrics significantly, achieving a new CLV:CAC ratio of 4.58:1. This demonstrates the importance of optimizing CAC and CLV for sustainable growth in app-based startups.

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AASHISH MEHRA
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10 views

Caselet2

FitNow is a mobile fitness app that initially struggled with low conversion rates from free to premium users despite rapid growth. By implementing strategies to lower Customer Acquisition Cost (CAC) and boost Customer Lifetime Value (CLV), the app improved its metrics significantly, achieving a new CLV:CAC ratio of 4.58:1. This demonstrates the importance of optimizing CAC and CLV for sustainable growth in app-based startups.

Uploaded by

AASHISH MEHRA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Caselet: FitNow App – Balancing CAC & CLV in a Digital Product

Background:
FitNow is a mobile fitness app offering guided workout programs, diet tracking, and
personalized coaching through AI. The app runs on a freemium model — basic features are
free, but users pay a monthly subscription of $15 to access premium workouts and custom
plans.

Growth and Challenge:


In its first year, FitNow scaled rapidly through Instagram influencers and app store ads. It spent
aggressively on user acquisition and reported over 100,000 app downloads. However, internal
data showed that only 8% of free users converted to premium, and the average paying user
stayed for only three months.

Metric Breakdown:

• CAC (Customer Acquisition Cost):


FitNow spent an average of $18 to acquire one user via paid channels.
• CLV (Customer Lifetime Value):
o Monthly subscription = $15
o Avg. subscription duration = 3 months
o Gross margin per subscription = 70% → $10.50/month
o CLV = 3 × $10.50 = $31.50
• CLV:CAC Ratio = 31.5:18 = 1.75:1

While FitNow had a positive ratio, it was not high enough to sustain marketing expansion or
attract further investment.

Strategic Response:

1. Lower CAC:
o Introduced referral incentives (invite a friend, get 1 free month).
o Shifted to organic SEO and YouTube tutorials featuring fitness coaches.
2. Boost CLV:
o Launched yearly plans at $120/year (at a discount), increasing commitment.
o Added gamification features and reward points to improve retention.
o Offered additional paid features like live trainer sessions and community access.

Outcome:
Within 5 months:

• CAC dropped to $12.


• CLV rose to $55 through increased subscription duration and add-ons.
• New CLV:CAC = 4.58:1 — now highly attractive for investors and sustainable for scaling.

Key Takeaway:
For app-based startups, CAC and CLV aren’t just financial metrics — they’re growth levers. A
balanced, optimized approach can drastically shift profitability and scalability, especially in
freemium and subscription models.

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