Everyone wants lower CAC but personally, I’ve always had a far stronger bias toward LTV.
I’ve seen companies become obsessed with lowering acquisition costs while quietly destroying the quality of customer they bring in.
At a high level glance the movement toward CAC obsession looks really great
- More leads.
- Cheaper leads.
- More demos.
- Lower blended CAC.
And it looks great until you look much deeper, underneath lies the truth that the lower CAC customers to acquire are often the weaker to build around.
Not exclusively and sector dependent but you can find that they are often
- Small/transactional accounts.
- Low urgency.
- No real expansion potential.
- High churn risk.
- Heavy support overhead.
The CAC looks healthy while LTV quietly collapses in the background.That maths for this simply does not work.
A customer that churns in 6 months is just simply expensive, regardless of how cheap they were to acquire. I have plenty of experience with “expensive” customers that stays for many years, expanding and becoming reference accounts which in the end is actually often incredibly cheap over the lifetime of the relationship.
There is a full equation here.
CAC only matters in the context of retention, expansion, payback, margin and customer quality
The problem is measuring CAC alone simply hides the pure business reality and it can be straight forward to improve CAC and watch the actual quality of your new business deteriorate.
It can be a trap and the dangerous part is that the market rewards this behaviour for a while.
Growth looks efficient, Pipeline looks strong and Board slides look very clean.
But eventually you wake up with a lot of customers but not many valuable ones.
I’ve seen this happen repeatedly in B2B SaaS and most often in venture-backed environments where pressure builds around scalable growth and “efficient acquisition”.
One of the issues is that the easiest thing to optimise is top-of-funnel activity but identifying customer durability is a much more difficult task.
The question is not:
“How do we lower CAC?”
It is:
“Which customers are worth paying, or at least putting more work in to acquire?”
Because great businesses are rarely built around the cheapest customers.
They are built around the right ones.
