Customer Acquisition Cost (CAC) is one of the most critical metrics for evaluating the efficiency of your marketing efforts. It reveals exactly how much you spend to win each new customer, and whether that spend is sustainable.
This key metric carries significant weight for SaaS businesses, which often spend significantly more to bring in new customers before those users generate any revenue. To illustrate this, Userpilot revealed that the average CAC in SaaS is $702, compared to $70 in eCommerce.
For businesses running paid marketing campaigns, CAC becomes even more critical. It reveals whether you’re overspending to win each customer, or if there’s room to scale your investment confidently, knowing your acquisition model is profitable.
In this guide, we’ll break down seven proven, data-driven paid marketing strategies to reduce customer acquisition cost without sacrificing growth. From refining your targeting and creative to building a retention engine that compounds your returns over time.
What is Customer Acquisition Cost (CAC)?
Customer Acquisition Cost (CAC) measures how much your business spends to turn a prospect into a paying customer. By comparing your total marketing and sales spend against the number of new customers acquired, you can assess the efficiency and profitability of your growth strategy.
In paid advertising, this covers your ad spend, agency fees, creative design, and all other campaign-related costs that contribute to a conversion.
To calculate customer acquisition cost:
CAC Formula: (Total Marketing Spend + Sales Spend) ÷ Number of New Customers Acquired
How To Reduce Customer Acquisition Cost in the SaaS Space
Reducing CAC ultimately means attracting more qualified customers without increasing your spend, in short, getting more bang for your buck.
For SaaS businesses, managing CAC is key to scaling profitably when customer payback periods (the time it takes to recoup the cost of acquiring a customer) can stretch for months.
After managing ads for hundreds of brands since 2017, across every type of budget and platform, I’ve seen too many teams throwing spaghetti at the wall to see what sticks, and hoping for growth. Let’s change that.
1. Improve Conversion Rates Through Optimised Landing Pages
Think of paid media as the mall: they drive traffic to your store. But it’s your landing page, your digital storefront, that convinces people to step inside and buy.
Your landing page has one job: turn visitors into paying customers. The clearer your message, the smoother your flow, and the stronger your call to action, the lower your CAC will be.
▸Hero section: Your first impression, make it count. Lead with the benefit, not the feature.
▸Benefit-driven copy: Show how your product improves life, not just how it works.
For example, say ‘Spend 80% less time on manual reports’ instead of ‘Automated reporting dashboard’.
▸High-quality visuals: Particularly video and user-generated content.
▸Social proof: Add testimonials, case studies, or logos to build trust.
▸Clear, actionable CTA: Guide the user to the next step, for example, ‘Buy Now’.
Once you have all the key elements in place, the next step is figuring out what truly resonates with your audience. Even small tweaks can make a big difference. Something as simple as changing the colour or placement of your CTA button can impact conversions. According to SQ Magazine, A/B testing can increase conversion rates by up to 30% over baseline versions.
Want to see how your site stacks up? Grab our Website Conversion Checklist to see exactly where your landing pages could convert better.
2. Refine Audience Targeting and Segmentation
When it comes to targeting, quality always beats quantity. Would you rather spend $100 on one lead with high intent or $100 on ten leads that are unlikely to convert?
If your answer was one lead, here’s how you’re going to do it:
▸ Google Ads: Focus your spend where audience intent is strongest. Use audience layering, like in-market, custom segments, and remarketing lists, to ensure your ads reach customer segments who’ve already shown buying signals. Prioritise your top-performing geographies and exclude locations or demographics that rarely convert.
▸Meta Ads: Instead of casting a wide net, zero in on audiences that closely resemble your best customers. Try using smaller, high-similarity lookalikes (around 1%) or layering interests and behaviours that signal strong buying intent. Larger target audience pools may look more affordable at first glance, but they often attract low-quality clicks that push your CAC higher
▸LinkedIn Ads: Use LinkedIn’s precision targeting to reach the exact decision-makers who fit your ICP, like Marketing Directors in B2B SaaS or Operations Heads in Tech. While the clicks can be more expensive, the quality of those leads is usually far higher, translating into more meaningful conversations and lower acquisition costs over time.
Tightening your targeting may shrink your audience, but by focusing your spend only where it’s most likely to convert, you can lower your CAC.
3. Capture Complete User Intent
Broad match keywords are the default keyword type in Google Ads, designed to maximise reach. But what’s the point of massive reach without intent?
For example, you might be targeting ‘project management platform,‘ but Google could show your ad for ‘project management courses‘ or ‘what is project management.’
Broadly similar words but completely different intent, one’s a buyer, the other’s a student (a.k.a. someone who’s not spending money anytime soon).
Here’s how to define what comes in and what stays out:
▸ Use exact and phrase match keywords: These limit Google’s freedom to ‘interpret’ your targeting. Your ads will only appear for searches that closely align with your offer, protecting your budget from irrelevant clicks.
▸ Add negative keywords: Filter out low-intent or misleading terms that waste spend. This stops your ads from showing for searches that look similar on paper but have no commercial value. If your software runs on a subscription model, exclude searches that don’t align with that intent. Example: ‘free project management software’.
Capturing complete user intent isn’t a one-time setup; it’s a constant process of refinement that keeps your clicks efficient and your CAC under control. I walk through this process step-by-step in Episode 2 of my SaaS Google Ads Series.
Watch the full breakdown below:
4. Take Control of Default Settings That Hurt Performance
Google Ads comes preloaded with so-called ‘helpful’ settings that promise more reach, but in reality, they often do the opposite of what you want: they raise your CAC. Unless you manually switch them off, you’re paying for clicks that look good on paper but rarely convert.
Here are the biggest culprits:
▸ Search Partners & Display Network: These settings automatically expand your ads beyond Google Search, into partner sites and random display placements. In theory, that means more visibility. In practice, it means diluted intent and a higher cost per acquisition.
▸ Performance Max Campaigns: Performance Max is Google’s ‘do it all for you’campaign type. In other words, it’s basically letting Google spend your budget wherever it wants. It spreads your ads across Search, Display, YouTube, Maps, and Gmail, often prioritising reach over results. In our experience, it only works for brands with massive budgets (think $7,000/day+) that aren’t worried about CAC efficiency. For everyone else, it’s usually a fast track to wasted spend.
Default settings can feel like a minefield to navigate; partnering with a specialised SaaS Google Ads agency can take the guesswork out for you.
5. Implement Data-Driven Creative Testing
Creative testing isn’t just about aesthetics; it’s one of the most powerful levers you can pull to reduce CAC. The faster you find what resonates with your audience, the less you waste on ads that don’t.
How creative testing can reduce customer acquisition cost:
▸ Isolate what actually works vs what you think works: Data-led testing removes guesswork and emotion from creative decisions. It allows you to iterate on your best-performing ideas while continuously experimenting with new ones.
▸ Avoid confirmation bias: It’s easy to assume what will work for a particular client based on past campaigns or years of experience in a niche, but that couldn’t be further from the truth. True efficiency comes from testing everything, not trusting assumptions.
The real power of creative testing is how quickly it compounds when you find winners fast; every campaign after that becomes cheaper and more effective.
One noteworthy case study from our portfolio comes from a student accommodation company. When they first partnered with us, their cost per lead was an unsustainable £293 per lead.
Our team ran broad creative testing across multiple angles and formats whilst experimenting with messaging, visuals, and ad types to find what truly resonated with their audience.
Within just a few weeks, their CPL dropped to £0.90, a dramatic improvement that also brought their CAC down across the board.
An example of some of the creatives we tested for them:
For rigorous A/B testing, you need both high-output creative and the ability to interpret data. Our creative team at Snowball Studios bridges the gap between design and analytics.
6. Implement Retargeting Campaigns
A recent report by Adobe found that around 96% of first-time website visitors aren’t ready to buy.
This is especially important for SaaS businesses, where sales cycles are longer and decision-making involves up to 266 touchpoints, according to Hockeystack. Prospects might see your ad, visit your site, attend a demo, compare competitors, and only then decide.
The goal of remarketing campaigns is to guide visitors back at the right time. Here’s how:
▸ Segment by intent: . For example, if someone was on the checkout page but left, you could retarget them with an offer for that exact product. If already a customer, you could send offers based on previous purchases.
▸ Vary your creative: Rotate between product benefits, social proof, and value reminders to keep engagement high.
- ▸ Use frequency caps: Stay visible without overwhelming your audience; consistency beats bombardment.
7. Tap Into Psychological Triggers
Understanding why people buy is just as important as understanding how they buy. Psychological triggers can dramatically improve your conversion rates, and when conversion rates rise, your CAC naturally drops.
Here are a few proven psychological principles you can use in your creative and landing pages to achieve a lower CAC:
▸ Social proof, borrow trust to build confidence: People trust people, especially those who’ve already taken the leap. Displaying testimonials, existing customer counts, or star ratings signals that your brand is credible and worth engaging with.
📊 Research insight: Robert Cialdini’s Influence (2006) found that individuals are significantly more likely to take action when they see others doing the same, the ‘social proof’ effect that underpins nearly every high-performing ad.
▸ Scarcity & urgency make customers act faster: When something feels limited, its perceived value increases. Creating time-sensitive or quantity-limited offers pushes users to make decisions sooner, shortening your sales cycle and lowering CAC.
📊 Research insight: Worchel, Lee, and Adewole (1975) found that participants rated cookies in a jar with only two left as significantly more desirable than a full jar, proof that scarcity drives action.
▸ Authority, build credibility through expertise: People are more likely to trust and convert when they believe an expert endorses or validates your product.
📊 Research insight: Stanley Milgram’s (1963) experiments demonstrated how authority figures strongly influence behaviour, even when participants are initially hesitant.
8. Bonus tip: Increase Retention and Referrals
You can be converting customers left, right, and centre with the best paid ads strategy in the world, but if they don’t stick around, you’ll end up paying to replace the same customers over and over again.
According to Bain & Company, acquiring a new customer can cost up to 25× more than keeping an existing one, and just a 5% increase in customer retention can lift profits by up to 95%.
While retention doesn’t directly change your CAC calculation, it dramatically improves the efficiency of your marketing spend over time. Every extra month a customer continues paying their subscription increases their customer lifetime value (CLV), and, in turn, boosts the return on investment (ROI) of that original acquisition.
▸ Customer Retention = Lower customer churn means a higher LTV. Retain customers by focusing on customer relationship management, introducing loyalty programs and providing ongoing value.
▸ Referrals = Organic growth at no ad cost. Customer satisfaction becomes your best marketing channel. Incentivise referral programs, testimonials, or user-generated case studies to attract more customers without spending a cent on ads.
SaaS companies like HubSpot use churn analysis not just to report losses, but to predict and prevent them, offering value at key drop-off points to retain users before it’s too late.
Key Takeaways
There are no shortcuts when it comes to lowering customer acquisition cost; it’s about methodical, continuous optimisation. Now you know how to reduce your CAC, but just as important is knowing when to lower it. There’s a fine balance between saving money and sacrificing growth.
Feel free to try our Customer Acquisition Cost (CAC) Calculator below.
If you’re lost in the numbers and think there’s room to improve efficiency, book a free audit or drop us an email at company@snowballcreations.com. We’ll review your accounts and show you where every dollar is (and isn’t) pulling its weight.
Customer Acquisition Cost (CAC) Calculator
Enter your costs and new customers to calculate CAC.