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Customer Acquisition Cost (CAC)
Aggregates total sales and marketing spend to determine the exact cost of acquiring one new paying customer.
How to Calculate Customer Acquisition Cost (CAC)
The formula to calculate this metric is straightforward.
CAC = Total Sales & Marketing Spend / Number of New Customers Acquired
A Real-World Example
Scenario: Your e-commerce store spends $3,000 on Google Ads, $1,500 on social media influencer partnerships, and $500 on marketing tools this month. Through these channels, you win 250 new paying customers.
Total Spend: $3,000 + $1,500 + $500 = $5,000
CAC: $5,000 / 250 = $20 per customer
Why Customer Acquisition Cost (CAC) Matters for Your Business
- Determines whether your marketing channels are financially sustainable or bleeding cash.
- Pairs directly with Customer Lifetime Value (LTV) to calculate your business true scaling runway (aim for an LTV:CAC ratio greater than 3:1).
- Allows you to budget precisely for future growth by forecasting exactly how much capital is required to hit target customer volumes.
Frequently Asked Questions
What is a good Customer Acquisition Cost (CAC)?
A good CAC is relative to your product price and customer value. If your CAC is $20, but the customer spends $100 with a 50% margin, your marketing is highly profitable.
What expenses should be included in total marketing spend?
You must include raw ad spend, software platform fees, agency retainers, and the salaries of employees handling sales and marketing.
How can I lower my CAC?
Optimize your conversion rate (CRO) to get more buyers from existing traffic, focus on organic SEO/email loops, and refine your ad targeting to weed out low-intent clicks.