Playbook / Lessons / Sales and advertising
StartupsSegment CAC instead of averaging it
Balfour gives CAC as total marketing and sales expenses divided by the number of new customers, and says the resulting average hides important insights. To make CAC useful for operating decisions he recommends segmenting it, starting with customer type, and comparing it to a segmented LTV.
“For internal operations and decision-making however, average CAC is almost always useless.”— Brian Balfour, Your Average CAC is Lying to You -- What to do Instead, Jan 2017
Do this
Work out last month's CAC separately for each customer type instead of one blended number.