CAC is simple: divide total acquisition spend by number of new customers. The problem is most companies only look at the final number without understanding where it works and where it doesn't.
We divide CAC into 5 blocks: Awareness (where are you discovered?), Consideration (why do they consider you?), Decision (why buy from you?), Onboarding (how do you activate them?) and Retention (do they stay or leave?).
The 5 CAC blocks
1. Awareness
How they discover your company. Can be: Google, social media, PR, word-of-mouth, partnerships. Each channel has a cost. If you spend $10K on Google Ads and it generates 100 visits, each visit costs you $100. That's the cost of the Awareness block.
2. Consideration
Why they consider your company instead of competitors. Here: your messaging, case studies, comparisons, demos. If of 100 visits only 10 request a demo, you're wasting money in Awareness. You need to improve Consideration.
3. Decision
Why they buy from you. Here: final pitch, price, guarantees, payment terms. If of 10 demos only 2 close, the problem isn't Awareness or Consideration. It's Decision.
4. Onboarding
How you activate the customer. Here: setup, training, first steps. Customers who don't activate leave (churn). They're customers you paid to acquire but never used the product. Money wasted.
5. Retention
Do they stay or leave. If 80% of your customers leave in month 6, your LTV is low. With low LTV, you can't afford high CAC. You need to improve Retention.
How to use the framework
For each block, calculate the real cost. Then identify where you're losing money. If your Awareness costs $100/visitor but your Decision closes 1 of 50, your actual CAC is $5,000. But if you optimize Consideration and close 1 of 10, CAC drops to $1,000.
Reducing cost in each block without sacrificing quality, you reduce total CAC. This framework has helped 20+ companies reduce CAC between 40-70%.