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 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
Evaluating marketing campaign effectiveness
Planning budgets for user acquisition
Discussing financials with stakeholders or investors
Comparing marketing channel performance
Setting growth benchmarks
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.
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.
| 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 |
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
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.
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
Looking to optimize your app's customer acquisition strategy?
Book a discovery call with our team to explore tailored solutions that reduce CAC and enhance profitability.