Subscriber Acquisition Cost (SAC) is one of the most critical KPIs in any subscription-based business model.
SAC is one of the major factors in your cost structure and a good leverage point to think about when designing or optimizing your business model.
Definition of the Subscriber Acquisition Cost
As the name suggests, SAC is the cost of acquiring a new subscriber for your business.
In other words, subscriber acquisition cost is the average cost of adding one subscriber to your subscriber base.
Calculation of the Subscriber Acquisition Cost
Usually, you have to specify a reference period and calculate SAC over it.
Many sources suggest you to choose the reference period based on your shortest subscription interval. For example, if the monthly subscription is your shortest offer, you might consider the last 30 days leading up to today as a basis for SAC calculation.
However, if you are looking for a reliable indicator, such a time interval would not be accurate enough, as most of your costs spread over longer timespans. Most of the marketing campaigns last a couple of months and many marketing services (such as email marketing tools) offer quarterly and yearly services.
Therefore, I do suggest to check the frequency of the costs incurred by your marketing efforts and choose your calculation period based on your marketing and advertising cash flow.
SAC Depends on Your Business Scale
The subscriber acquisition cost depends heavily on your business scale. Thus you are not able to predict it for long-term if you have scale-up plans in mind.
Usually, SAC will be reduced after you scale-up your business. However, in mature and competitive markets, SAC might be increased as your business grows. Because instead of converting non-customers to customers, you have to convince subscribers of the other businesses to accept the switching costs and turn into your customer.
Subscription Acquisition Costs in Different Industries
You have to be careful in benchmarking your SAC against other businesses and industries.
Here are some of the reasons that such comparisons can be misleading:
- SAC depends on the business model and you cannot compare the SACs in a vacuum.
- Some of the acquisition channels are cheaper than their alternatives, but their’s subscriber lifetime would shorter or churn rates would be higher. So you may have higher SAC comparing to your competitor, but still be more profitable because of the higher retention rate.
- SAC depends on the age of the businesses and awareness of the brand in the market and among the people you are trying to reach. So you can’t compare SAC of a fresh company with the one which is working for a couple of months and years.