Software Growth

Blended CAC

Blended CAC is total sales and marketing spend divided by all new customers, organic and paid. Paid CAC counts only paid-channel customers and spend.

Blended CAC mixes every new customer into one average, whether they came from an ad, a search result, a referral or a friend of the founder. Paid CAC looks only at customers you bought through paid marketing. The two answer different questions, and mixing them up is one of the easiest ways to fool yourself about growth.

How to calculate each

Example: this month you spent $12,000 in total on sales and marketing, of which $9,000 went to ads. You won 40 customers, 25 of them from the ads and 15 from organic search, referrals and direct visits.

The blended number looks 17% better because 15 customers cost you little to win this month.

Which one to use

The a16z guide to startup metrics says paid CAC matters more for judging whether you can scale, because it shows how well your paid campaigns work. Blended CAC does not tell you that, since it includes customers you would have gotten anyway.

  • Use paid CAC to decide whether to raise ad budgets. If the paid number is worse than your customer lifetime value allows, more spend makes things worse.
  • Use blended CAC for the company view, such as CAC payback and cash planning, because it reflects what you really spent to grow.

The trap of rising spend

Blended CAC often rises when you scale paid channels, because organic customers stop being a big share of the mix. If you double ad spend and blended CAC jumps from $300 to $450, the marginal customer is costing far more than the average. Watch both numbers over time and look at the gap.

For small teams

Many bootstrapped products get most customers from content, SEO or word of mouth and run almost no paid channels. In that case blended CAC is the honest number and paid CAC may rest on a handful of customers, which makes it noisy. Do not over-read a paid CAC built on five conversions.

Whichever you track, label it. A board slide or a Twitter post that says "our CAC is $300" with no mention of blended or paid is hard to compare with anyone else's. Start from the definition of customer acquisition cost and be explicit about what is in the numerator.

Sources

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