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Advertising glossary

What is CAC (customer acquisition cost)?

Definition

CAC is the total cost to acquire one new customer. Unlike CPA, it often includes all marketing and sales costs, not only ad spend.

CAC explained

Comparing CAC with LTV shows whether growth is sustainable. Many brands aim for an LTV to CAC ratio of three or more.

Formula

CAC = total acquisition costs ÷ new customers

Example

Spending 20,000 dollars on ads, creators and tools to acquire 500 new customers gives a CAC of 40 dollars.

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Keep learning

LTV (customer lifetime value)LTV is the total revenue or profit a customer generates over their relationship with your brand.CPA (cost per acquisition)CPA is what you pay in ad spend to get one conversion, such as a purchase or lead.MER (marketing efficiency ratio)MER, also called blended ROAS, is total revenue divided by total marketing spend.