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App Customer Acquisition Cost (CAC): Metrics & Optimisation

App Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the total expense incurred to acquire a new user for your app. This includes costs related to marketing, advertising, sales efforts, and any other resources used to attract and convert potential users into active customers.

Why It Matters 

Why Founders Should Care About This Term:

  • Budget Allocation – Helps determine how much to invest in marketing and sales

  • Profitability Analysis – Ensures acquisition cost is lower than the revenue a user generates

  • Marketing Efficiency – Evaluates which acquisition channels are most effective

  • Investor Insight – Offers a clear metric for assessing business viability

  • Strategic Planning – Informs scaling and optimisation of acquisition strategies

Use This Term When...

  • Evaluating marketing campaign effectiveness

  • Planning budgets for user acquisition

  • Discussing financials with stakeholders or investors

  • Comparing marketing channel performance

  • Setting growth benchmarks

Real-World Example 

We tracked customer acquisition cost (CAC) through integrated analytics and ad tracking tools. This allowed the client to optimise marketing spend and improve ROI by focusing on the most cost-effective channels.

Founder Insight

Always compare CAC with Lifetime Value (LTV). A healthy business typically has an LTV that's at least 3× CAC, ensuring you're earning significantly more from a user than it cost to acquire them.

Key Metrics / Concepts

Metric Description
CAC Formula Total Marketing & Sales Expenses ÷ Number of New Customers Acquired
LTV (Lifetime Value) Total revenue from a customer during their engagement period
Churn Rate Percentage of users who stop using the app
Payback Period Time to recoup CAC through customer revenue
Marketing ROI Return on investment from acquisition campaigns

Tools & Technologies

  • Google Analytics – Tracks behavior and source attribution

  • Mixpanel – Visualizes user flow and conversion analytics

  • Amplitude – Advanced insights into retention and acquisition trends

  • Appsflyer – Attribution tool to track install origins and CAC

  • Firebase Analytics – End-to-end mobile analytics from Google

What’s Next / Future Trends

With AI and machine learning, CAC forecasting will become smarter and more automated. Privacy regulations (like ATT and GDPR) will also force businesses to refine tracking methods and lean more on first-party data and contextual targeting.

Related Terms

  • User Acquisition – Gaining new users through various channels

  • Retention Rate – How well you keep users over time

  • Conversion Rate – How often users complete a key action

  • Marketing Funnel – The journey from awareness to purchase

  • Cost Per Install (CPI) – Specific metric for paid app installs

Helpful Videos / Articles / Pages

Call to Action

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Book a discovery call with our team to explore tailored solutions that reduce CAC and enhance profitability.

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