ACV is the total value of a customer’s contract over a 12-month period.
Annual Contract Value (ACV) is a metric used in product management to measure the total value of a customer’s contract over a 12-month period. It is calculated by taking the total amount of money that a customer has agreed to pay for a product or service over the course of one year and dividing it by 12. ACV is an important metric for product managers because it helps them understand how much revenue they can expect from each customer over the course of the year, as well as how much they need to invest in order to keep that customer happy and engaged. Additionally, ACV can be used to compare different customers and products, allowing product managers to make more informed decisions about which products and customers are most profitable.
Let's say a company has a customer who signs up for a subscription service that costs $100 per month. The annual contract value (ACV) of this customer would be $1,200 ($100 x 12 months). This means that the company can expect to receive $1,200 in revenue from this customer over the course of the year.