May 17, 2023

CAC Is Back. How to Inspect and Reduce Customer Acquisition Costs.

People.ai
CAC Is Back. How to Inspect and Reduce Customer Acquisition Costs.

Table of Contents

Calling all CFOs, RevOps, and customer success leaders: Do you know your customer acquisition cost (CAC) at the account level? Are you using CAC data to drive higher margins? 

According to David Sacks (General Partner at Craft Ventures), in a downturn economy, the only three things that matter are:

  1. Growth
  2. Burn
  3. Margins

Watch David Sacks elaborate on this topic in the clip below (2 minutes in length), which is from the All-in Podcast, Episode 117: 

 

Why is the clip relevant? In 2024, companies are trying to figure out how to drive profitable growth. Gone are the days of growth at all costs.  

For large public companies, there is escalating shareholder pressure to drive higher margins.

Growth stage companies are managing burn rates and runway to ensure they can raise the next round of funding on favorable terms and minimal dilution.

For many companies, the #1 expense is people. In fact, the most recent series of layoffs – especially in the tech space – shows that this is the case. Companies are taking steps to tighten their belts and do more with less.

Unfortunately, most companies are still unable to answer critical questions around topics like:

  • Driving profitability: Which accounts do we need to switch to a more profitable product/service mix before we start losing money on the account?
  • Customer engagement: Which account buyer personas do we need to engage to retain them and expand? Which accounts and products are driving the highest margins relative to the cost to acquire, maintain, and support the customer?
  • Go-to-market (GTM) planning: As we plan GTM for next year, which verticals, segments, regions, teams, or products should we double down on (or divest) to drive higher margins and profits?

Account-level visibility into CAC is key to driving better margins and profitability

So what’s the best way to measure the profitability and scalability of the business? Watch David Friedberg elaborate on this topic in the clip below (2 minutes in length), which is also from the All-in Podcast, Episode 117:

In the clip above, David Friedberg explains the urgency behind understanding your customer lifetime value (LTV) to CAC ratio in the aggregate (i.e., at the company level). But more granular visibility into customer acquisition costs (down to the account level) is needed to drive profitability today.

Most CFOs and financial planners have dollar totals on how much the customer success team costs, or the sales team costs in the aggregate, but they don’t have visibility into CAC down to the account level. And they’ve never had it. They can calculate GROSS margins for the business, but don’t have the ability to make account-level decisions on divesting or investing, or changing to a different product mix, based on profitability.

Video: Using AI to double down on your most profitable accounts  

Below is a short, 5-minute demo video that outlines how some of the world’s leading companies are driving profitable growth by making data-driven decisions – enabled by AI. In this demo example, we are looking to drive higher margins by doubling down on our most profitable verticals and accounts.

Explore our self-guided demo to see AI and data-driven decisions in action


How do you measure CAC? What’s included or excluded? How does your CAC metric impact how you plan for the business and go to market?  What data do you use to measure growth efficiency?

Learn all of the ways People.ai can  drive revenue growth for your business