Return on Customer Acquisition Cost (rCAC) is the final SaaS metrics used in our framework and provides an important benchmark for determining the expected return on your customer acquisition investment. If you haven’t yet read earlier posts covering the prior six metrics, I suggest you start here.
Step 7: Calculate rCAC – Return on Total Customer Acquisition Spending
rCAC is the multiple of the acquisition cost provided by the lifetime gross margin, and can be calculated by dividing the aggregate gross profit contribution by acquisition cost (rCAC = RGP x eLT / tCAC). rCAC brings it all together by combining the raw unit economics of GMPP with expected customer lifetime. By utilizing GMPP and rCAC together, we can quickly determine 1) the time required to recoup the cost of acquiring a customer, and 2) expected leverage on that acquisition spend. The two metrics together are crucial when making decisions about the most efficient ways to allocate resources. A channel with a rapid GMPP but very little rCAC ultimately means little profit will be realized from customers because they churn soon after the breakeven point. Conversely, customers with great rCACs but very long GMPPs create a substantial need for capital to weather the storm until they become profitable (and don’t forget to discount those future cash flows).
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