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CAC
Customer Acquisition Cost: the average cost to win a new customer. If media is the only input, the number looks cheaper than it is.
Detailed explanation
Narrow CAC may count ads only. Fully loaded CAC also splits creative, tools, sales time, and acquisition discounts. The denominator must be new customers, not repeat orders mixed in.
Read it with LTV. Folk rules like 3:1 LTV:CAC are not universal; payback and cash still decide whether you can scale.
Blended versus channel CAC tells you where to shift budget. Organic and referrals lower media CAC but still cost content effort.
Frequently asked questions
- What should be included in CAC?
- Media, agency, creative, sales commission, and acquisition-tied discounts. Ad invoices alone are too narrow.
- How do you lower CAC?
- Conversion rate, targeting, organic channels, and referrals. Cutting price to “cheap CAC” often deletes margin.
Related terms
Internal links for the topic cluster — read these concepts together.
- CACAcquisition Cost is the total amount a business spends, on average, to win one new customer or conversion.
- LTV (Customer Lifetime Value)LTV is the estimated total revenue a customer will generate for a company over the course of their relationship with the brand; it's a core metric for evaluating long-term marketing return.
- LTV:CAC RatioLifetime value divided by customer acquisition cost. It summarizes how many times a customer covers what it cost to win them.
- ROASROAS (Return on Ad Spend) is the revenue generated for every unit of advertising spend; it is used to measure profitability in performance marketing.
- Payback PeriodHow many months until a customer’s contribution recovers CAC. It is a cash view, not just an LTV:CAC ratio.
- Referral ProgramA growth mechanic that rewards existing users for bringing new customers. Unlike paid media, it transfers trust.