Ad glossary
CAC (customer acquisition cost)
The total cost of acquiring one new customer, including ad spend and other acquisition costs, divided by new customers won.
CAC, or customer acquisition cost, is the average amount you spend to win one new customer. Unlike CPA, which counts every conversion an ad drives, CAC focuses only on first-time buyers and often includes more than media spend.
How to calculate it
CAC = total acquisition costs ÷ number of new customers
What goes into "total acquisition costs" is a business decision. A narrow version uses ad spend only. A fuller version adds creative production, agency or freelancer fees, influencer payments and software used for acquisition.
Worked example (made-up numbers): in a month you spend $8,000 on ads, $1,500 on creative and $500 on tools, for $10,000 in total. You acquire 250 new customers. CAC = 10,000 ÷ 250 = $40.
Why it matters
CAC is the cost side of the LTV to CAC relationship. If a customer is worth $180 in margin over their lifetime and costs $40 to acquire, you have room to grow. If they are worth $45 and cost $40, there is little room for error. Use the LTV:CAC calculator to compare the two.
In practice
- Track CAC by channel and by cohort rather than as a single blended figure.
- Pair it with payback period: how many months it takes for a customer's margin to cover their CAC.
- Expect CAC to rise as you scale and reach less responsive audiences, and plan budgets with that in mind.
Last reviewed Oct 27, 2026