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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 CAC Matters
Here’s why founders should care about CAC:
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Budget Allocation – Helps determine how much to invest in marketing and sales
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Profitability Analysis – Ensures acquisition cost is lower than the revenue a user generates
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Marketing Efficiency – Evaluates which acquisition channels are most effective
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Investor Insight – Offers a clear metric for assessing business viability
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Strategic Planning – Informs scaling and optimisation of acquisition strategies
When to Use CAC
You’ll want to track CAC when:
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Evaluating marketing campaign effectiveness.
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Planning budgets for user acquisition.
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Discussing financials with stakeholders or investors.
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Comparing marketing channel performance.
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Setting growth benchmarks for your app.
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
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Google Analytics – Tracks behavior and source attribution
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Mixpanel – Visualizes user flow and conversion analytics
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Amplitude – Advanced insights into retention and acquisition trends
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Appsflyer – Attribution tool to track install origins and CAC
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Firebase Analytics – End-to-end mobile analytics from Google
What’s Next?
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
Helpful Resources
Ready to Reduce Your CAC and Increase Profitability?
Looking to optimise your app's customer acquisition strategy? Book a discovery call with our team to explore tailored solutions that reduce CAC and enhance your app’s profitability.