Is Blended Customer Acquisition Cost (CAC) a good metric?

A guilty pleasure if I may: I think Blended ROAS/ CAC is a good metric.

But when should you use it and when does it lose accuracy?

What is Blended CAC?

Let's get some definitions in play. By Blended Customer Acquisition Costs (CAC) I mean measuring the total outcomes vs. total spend:

➡️ Total Media Spend
Total New customers

or flipped if reporting ROI

When to use Blended CAC? Use for reporting overall Media spend

Now there are two reasons why I like this metric for reporting the overall impact of media spend on driving your business:

1️⃣Its simple & easy

Your CEO, CFO & Investors will easily understand this metric. You can demonstrate how scaling spend will drive more revenue. What's not to like?

2️⃣The context

A Blended CAC is usually used at lower revenue levels - maybe £1-£20m of revenue (maybe a bit higher). At this point, an advertiser is usually left with two options to report: Blended CAC or Platform CAC. Platform CAC reflects what Meta or Google claim to have delivered, which rarely matches your finance team’s view of how many customers actually converted. In that context, Blended CAC is usually the more reliable of the two.

The issues of blended CAC

Whilst it is a good metric, it's not perfect.

As you grow and other factors become ever more important (price changes, product launches, etc.) your blended CAC becomes more incorrect. The split between media-driven sales and customers who would have come anyway also grows (that's your Base or Run Rate of sales).

At this point, measuring media incrementality is the name of the game. That means you can unpick how many extra sales over the Run Rate that your media drives. Your blended CAC becomes less insightful. Sticking with it too long and you will end up with wasted spend.

As you scale beyond £20m, Blended CAC becomes less relevant

At lower revenue blended CAC, it's the worst of two evils.
But focus on media incrementality as you scale.