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CAC (Customer Acquisition Cost)
The total cost of acquiring a new customer, including marketing, sales, and related expenses.
Tags:metricsunit economicsmarketing spendprofitabilitygrowth
Customer Acquisition Cost (CAC) is how much you spend to get one new customer. It includes everything: ads, sales team salaries, software, content creation — all costs related to bringing in customers.
The formula: CAC = Total Sales & Marketing Costs ÷ Number of New Customers
If you spent $10,000 on marketing last month and got 100 new customers, your CAC is $100.
CAC is one half of the most important equation in business: LTV:CAC ratio. Your Lifetime Value should be at least 3x your CAC. Otherwise, you're spending too much to acquire customers relative to what they're worth.
Why CAC matters for ads:
- It tells you the maximum you can spend per conversion
- It helps you set realistic ROAS targets
- It reveals if your acquisition channels are efficient
CAC only tells you the cost side. Always pair it with LTV and Payback Period to understand if your acquisition is actually profitable.