Cost of Acquiring (CAC) is the total cost a business incurs to acquire a new customer. The cost generally includes marketing spend, advertising, software tools, and other expenses.
Cost of Acquiring (CAC) can be calculated by dividing total sales and marketing expenses by the number of new customers acquired during a specific period.
Step 1: Decide on the timeframe for the calculation — typically monthly, quarterly, or annually.
Step 2: Calculate Total Sales & Marketing Costs
Include all expenses related to acquiring customers during the chosen period:
Ad spend (Google, Facebook, etc.)
Sales team salaries and commissions
Marketing team salaries
Tools and software used for marketing/sales
Agency fees
Content creation
Events, webinars, promotions
Step 3: Count the Number of New Customers Acquired
Count how many new paying customers were acquired during the same period.
Step 4: Use the CAC Formula
CAC = Total Sales & Marketing Cost/Number of New Customers Acquired
CAC = Total sales and marketing costs / Total number of new customers acquired.
For CAC, the lower the numbers, the better. Ideally, the CAC payback period should be 12 months or less. Also, the ratio of CLTV:CAC should be 3:1, which means each customer should generate profit around 3 times the cost of acquiring them.
Customer Lifetime Value
Conversion Rate
Marketing ROI
Customer Retention Rate
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Both views offer value. Monthly CAC helps catch spikes early and evaluate short-term campaign performance, while quarterly CAC smooths out fluctuations and gives a better view of strategic trends. High-growth companies often monitor CAC monthly, but plan based on quarterly or trailing averages.
Different channels produce different CACs. Organic channels like SEO, referrals, or content often have lower CACs but require time to build. Paid channels like search ads or social media may bring faster results but usually come with a higher CAC. Channel-level tracking is crucial for budget optimization.
Although similar, CAC refers specifically to the cost of acquiring a paying customer. In contrast, CPA is often used more broadly to describe any defined action, such as a lead, a signup, or an app install. CAC is more strategic and long-term focused, whereas CPA can be a short-term campaign metric.