Analytics

What is CAC (Customer Acquisition Cost)?

Total marketing + sales spend divided by new customers acquired. The numerator of every marketing ROI calculation.

Also known as: customer acquisition cost

CAC is the fully-loaded cost of acquiring a new customer. Calculated as: (total marketing spend + total sales spend) / new customers acquired in the period.

"Fully-loaded" matters — most companies underreport CAC by counting only ad spend, not the salaries of the marketing and sales people running the program. Real CAC includes: paid media, salaries, agency fees, software, content production costs.

CAC must be measured against LTV. CAC of $500 is wonderful if LTV is $10,000. The same CAC is catastrophic if LTV is $300. The ratio LTV/CAC > 3 is the SaaS-industry benchmark for a healthy unit economics; for one-time-purchase service businesses, the equivalent is payback period — how many months until the customer pays back their CAC.

Why it matters

Most businesses don't know their CAC and underestimate it. The ones that do tend to grow more profitably because they make marketing decisions on math.

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More Analytics terms

LTV (Lifetime Value)

The total revenue a customer generates over their entire relationship with your business. The denominator of every marketing ROI calculation.

Churn Rate

The percentage of customers (or revenue) that stop doing business with you in a given period.

Bounce Rate

The percentage of visitors who land on your site and leave without interacting. A high bounce rate often signals a relevance or quality problem.

Dwell Time

How long a visitor stays on a page before bouncing or moving on. A signal Google uses to gauge content quality.

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