The holiday season is a frenzy of competition, with brands vying for consumer attention in an increasingly crowded marketplace. In this high-stakes environment, the concept of Customer Acquisition Cost (CAC) often gets oversimplified. Many businesses approach CAC as a static metric—an unchanging target to aim for regardless of timing or audience.
The reality? CAC targets should always account for differences in customer value and market conditions. This becomes even more critical during the holidays when user behavior shifts and competition intensifies.
Here’s why embracing dynamic CAC targets—both for customer segmentation and seasonality—could make or break your long term & holiday strategy.
Static CAC Targets: A Narrow Approach
A static CAC target is a fixed benchmark. Businesses using this approach might set a goal like: “Our CAC must not exceed $30.” While this simplicity makes it easy to communicate and plan, it often fails to account for the complexities of both customer value and market dynamics.
Static targets assume:
The average cost of acquiring a customer is constant.
Margins, customer lifetime value (LTV), and competitive pressures don’t change.
Seasonal trends or competitive bidding spikes can be ignored.
This one-size-fits-all thinking is risky. Here's why:
By Audience: Static targets rely on averages, leading to overspending on low-value customers and underspending on high-value ones.
By Season: The holidays bring heightened competition, increased intent, and shifts in value that demand flexibility.
For example:
Increased competition drives up costs per click (CPC) and per conversion.
Holiday buyers might have higher average order values or potential LTV.
Peak spending windows offer opportunities to win high-value customers who are worth a premium CAC.
By clinging to a static CAC, businesses risk missing high-value opportunities or overinvesting in audiences who won’t generate long-term returns.
Dynamic CAC Targets: Adapting to Audience and Seasonality
Dynamic CAC targets shift with context, recognizing that not all customers—or all seasons—are created equal. This approach goes beyond averages, accounting for both customer profiles and seasonal behavior.
A Segmented Approach by Customer
Dynamic CAC targets adapt to customer value. For instance:
High-LTV customers: You might accept a higher CAC for audiences with greater potential lifetime value, like repeat buyers or subscription prospects.
One-Time Purchasers: Lower-LTV segments might warrant a lower CAC, ensuring you don’t overpay for one-time buyers.
Seasonal Adjustments Matter Too
User behavior changes during the holidays, which impacts both acquisition cost and value.
For example:
Shoppers are more likely to splurge or purchase bundles during the gifting season.
Competitive pressure increases as more brands vie for the same high-intent audiences.
Dynamic CAC lets businesses align spend with these fluctuations:
Market Conditions: If CPCs double during Black Friday, your CAC target should adjust to remain competitive.
Strategic Goals: Whether prioritizing profit per purchase or market share growth, your CAC targets should reflect your objectives.
Example of Dynamic CAC in Action
Imagine your business sells premium kitchen gadgets. During most of the year, your CAC target is $30. But during the holiday season:
Order values spike as shoppers bundle products for gifts.
Higher competition demands greater flexibility to stay competitive.
Strategic analysis shows a CAC of $45 is justifiable given the increased LTV of holiday buyers.
By raising your CAC target dynamically, you capture high-value customers and avoid being outbid in key auctions.
Static vs. Dynamic CAC: Why It Matters
Static CAC is simple, but simplicity often comes at a cost.
Averages don’t tell the full story: They can lead to overspending on low-value customers and missing out on premium opportunities.
User behavior evolves: What works for your business in June won’t necessarily work in December.
Dynamic CAC targets allow businesses to remain flexible, seize high-value opportunities, and balance short-term competition with long-term growth.
Embrace Dynamic CAC This Holiday Season
This holiday season, don’t let outdated thinking limit your success. Use a segmented CAC approach by audience to optimize for customer value and adjust for seasonal shifts to maximize profitability.
Need help developing a data-driven CAC strategy for your business? Let’s talk!