CAC
Customer Acquisition Cost
Quick definition
Customer acquisition cost (CAC) is the average amount spent to acquire one new customer in a given period. What counts as acquisition cost is a choice, so it should be defined once and applied consistently.
Formula
CAC = Total Acquisition Costs ÷ New Customers Acquired
Formula variables
- Total Acquisition Costs
- The sales and marketing costs included in the measurement: typically advertising spend, plus whatever else you decide to include, such as salaries, tools and agency fees.
- New Customers Acquired
- Customers who made their first purchase or became customers in the same period. Repeat customers are excluded.
Worked example
- Total acquisition costs
- $12,000
- New customers acquired
- 80
$12,000 ÷ 80
Result: $150
On average, each new customer cost $150 to acquire in that period.
How to interpret it
CAC only becomes meaningful relative to the value a customer brings. A $150 CAC can be healthy for a customer who generates $600 of gross profit over their lifetime and unprofitable for one who generates $100. It is therefore usually read alongside customer lifetime value, gross margin and payback period.
When it is useful
- Judging whether acquisition spend is sustainable relative to customer value.
- Comparing the cost of winning customers across channels, using a consistent cost definition.
- Planning budgets for a target number of new customers.
Limitations
- "Blended" CAC (all new customers) and "paid" CAC (only customers from paid channels) answer different questions.
- Spend and the resulting customers can fall in different periods when sales cycles are long.
- Attribution gaps make channel-level CAC an estimate.
Common mistakes
- Comparing a CAC that includes salaries with one that counts only advertising spend.
- Dividing one period's spend by another period's customers without accounting for the sales-cycle lag.
- Counting repeat purchases as new customers.
Related KPIs
Related marketing terms
Related tools
Campaign URL Builder
MarketingConsistent campaign tagging lets analytics group new customers by campaign and channel, which feeds the customer counts used here. The builder tags links; it does not calculate CAC.