CAC (Customer Acquisition Cost)
Total marketing and sales spend divided by the number of new customers it produced in that period. A rising CAC over time, especially on paid channels, often signals rising competition for the same keywords or audiences - which is why healthy businesses track CAC against LTV rather than in isolation.
In practice
A rising CAC over time, especially on paid channels, often signals rising competition for the same keywords or audiences - which is why healthy businesses track CAC against LTV rather than in isolation.
A brand spends $10,000 on ads in a month and gains 200 new customers - a $50 CAC for that channel and period.
Why it matters
A rising CAC is often the first visible sign that a channel or audience is becoming saturated, well before overall growth or revenue numbers show any obvious slowdown.
Worth knowing
- Should include all costs tied to acquisition - ad spend, agency fees, tools - rather than raw media spend alone.
- Varies significantly by channel, so a single blended CAC can hide which channels are actually efficient.
- Only meaningful in context of LTV - a low CAC on customers who rarely repurchase isn't a good result.
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