Some companies use activation promotions as part of their [[Customer Acquisition Cost (CAC)]]. These promotions aim to encourage users to complete their first transaction or engage with the service. Common examples include: - "First order is on us" - One month free - A starting balance in the wallet to spend on the service - X% off the first order - Signup bonuses - Referral bonuses While these promotions are outside traditional marketing expenses, they still contribute to CAC and should be accounted for accordingly. Referral bonuses, in particular, should be counted for both the referrer and the new user. ## Impact on CAC and Risks **Promotions can significantly elevate CAC**, and their effectiveness must be measured against [[User Retention Rate]] and [[Customer Lifetime Value (CLV or LTV)]]. Some key risks include: - Users churning immediately after redeeming the promotion - Failure to convert users into regular or habitual customers - Fraudulent activities such as self-referrals or multiple account abuse To ensure sustainable growth, companies must maintain a balanced metric comparing CAC to LTV while also considering post-promotion retention and [[Conversion Rate]]