Acquisition - Where Users Come From — and What It Costs

Acquisition: Where Users Come From — and What It Costs

We previously discussed the user journey and one of its most critical stages: user activation. Now let’s shift our focus to an earlier stage — user acquisition.

Sometimes called “top of the funnel” or simply “how people find you,” acquisition marks the very beginning of the journey — the moment someone first hears about your product and decides to check it out.

That’s what acquisition is about: bringing users in. Whether they find you through Google, see an Instagram ad, hear about you from a friend, or walk past a billboard, that first touchpoint is what pulls them into your world.

As a data analyst, your job is to make sense of these efforts. But before you can analyze acquisition, you need to understand how it works.

In this chapter, we’ll cover:

• The main acquisition channels and how they differ
• How to calculate and interpret CAC (Customer Acquisition Cost)
• Why channel efficiency matters more than just traffic volume
• The power of segmenting users by acquisition source
• How to use the LTV/CAC ratio to assess growth sustainability

Acquisition Channels: How Users Find You

Every user journey has a starting point. That starting point is often called the acquisition channel — the specific way someone first found and entered your product.

Here are some common acquisition channels:

Channel	Example Use Cases
Paid Ads	Google Ads, Facebook, Instagram, LinkedIn
SEO	Organic search traffic from Google or other search engines
Content Marketing	Blog posts, YouTube videos
Referral	Invite-a-friend links, affiliate programs
Direct	User types the URL directly
Email	Newsletters, drip campaigns
Social Media	Organic reach through posts or viral content
Partnerships	Embedded in another company’s workflow

Each channel brings different types of users. For example:

• SEO traffic often has high intent but low urgency.
• Paid ads can bring volume fast — but at a cost (remember our discussion of ROI?).
• Referral users tend to be more trusting (they heard about you from a friend), so their conversion rates may be higher.

That’s why channel-level analysis matters. Even before diving into metrics, it’s useful to segment users by how they found you.
Their behavior, likelihood to convert, and lifetime value (more on that soon) often vary significantly depending on the acquisition source.

CAC: How Much You Pay to Get a Customer

Customer Acquisition Cost (CAC) is one of the most important metrics in business and marketing analytics.
It tells you how much you spent to acquire one paying customer.

The basic formula:
CAC = Total Marketing + Sales Spend / Number of New Customers Acquired

For example:

• You spent $10,000 on ads, content, and sales salaries this month.
• You got 100 new paying customers.
• Your CAC = $10,000 / 100 = $100

That $100 figure is what you paid — on average — for each customer this month.

A few notes:

• CAC only makes sense when paired with LTV (lifetime value — more on that below).
• It’s usually calculated per time period (monthly or quarterly).
• You can and should calculate CAC by channel.

LTV vs. CAC: Are We Actually Making Money?

CAC tells you how much it costs to acquire a customer — but that’s only half the picture.
In business, we don’t just care about cost. We care about return on investment (ROI). So what’s the return? That’s where Lifetime Value (LTV) comes in.

Why lifetime value? Because a customer might cost you money in the short term but generate profit over time.
And by “lifetime,” we don’t mean the person’s entire life — just the period they’re an active, paying user.

That could be:

• 3–4 months for a dating app user, until they find love and churn
• Several years for a health insurance subscriber with monthly payments
• One-time for an eCommerce shopper — unless they come back

Understanding LTV vs. CAC is how businesses evaluate whether growth is sustainable.

• If it costs you $100 to acquire a customer who brings in $300 over their lifetime, that’s a good deal.
• If it’s the other way around — you’re burning money.

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The Most Important Ratio in Acquisition

LTV / CAC

Where:

• LTV (Lifetime Value) = total expected revenue from a customer over their relationship with the product
• CAC (Customer Acquisition Cost) = how much you paid to acquire that customer

For example:

• If your LTV is $300 and CAC is $100, your ratio is 3:1 — meaning every dollar you spend brings in three. That’s considered a healthy benchmark.

A common rule of thumb is:

• 3:1 = solid
• 1.5:1 or lower = thin margins or unsustainable
• 5:1+ = potential underinvestment in growth

Of course, this varies by product and industry.

Why Analysts Track This Ratio

Analysts monitor LTV/CAC across different dimensions:

• Product lines (e.g., subscriptions vs. one-off purchases)
• User segments (e.g., enterprise vs. SMB customers)
• Acquisition channels (e.g., SEO vs. paid ads)
• Time (e.g., LTV/CAC by cohort or campaign)

It’s a strategic compass:

• If your LTV/CAC ratio is improving, you’re on the right path.
• If it’s declining, something in your acquisition or monetization strategy likely needs fixing.

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Segmentation by Source

Once users are in, you want to understand what they do. That’s where segmentation comes in.

Instead of looking at all users in one giant bucket, segment them by where they came from. For example:

Segment	Avg Retention	Conversion Rate	Churn Rate
Organic Search	35% after 30d	8%	Low
Paid Social	10% after 30d	2%	High
Referral	50% after 30d	15%	Very Low

This kind of breakdown helps you answer:

• Are we spending money on low-value users?
• Which channels bring the users who stick around?
• Is there a specific source we’re under-investing in?

Segmentation unlocks strategic decisions.

It’s also helpful when trying to spot misleading numbers.
If overall churn is rising, it might be because a new campaign is bringing in poor-fit users — not because the product itself got worse.

Summary: What You Learned

In this chapter, you learned how user acquisition works — and why it’s more than just bringing people in the door. We covered:

• The main acquisition channels, and how each attracts different types of users
• How to calculate CAC and why it's a critical metric
• Why channel efficiency matters more than raw traffic volume
• How segmentation by source helps you uncover meaningful behavioral patterns
• The LTV/CAC ratio, and how it guides strategic decisions about growth and marketing spend

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Key Terms Recap

Term	Definition
Acquisition Channel	How users first discover your product (e.g., paid ads, SEO, referrals)
CAC (Customer Acquisition Cost)	The average cost to acquire one paying customer
LTV (Lifetime Value)	The total expected revenue from a customer over their time using the product
LTV/CAC Ratio	A measure of acquisition efficiency; shows whether your growth is profitable
Segmentation by Source	Grouping users based on how they arrived, to analyze behavior by channel

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What’s Next?

In the next chapter — Customer Retention: Why People Stay (or Leave) — we’ll dive into what happens after someone signs up.

You’ll learn why retention is one of the strongest indicators of customer satisfaction, how to improve it at key moments in the journey, and which metrics actually matter.
Whether it’s onboarding, product value, or ongoing engagement — we’ll break down what makes users stick, and why it’s everyone’s job to make that happen.