What is CAC? Customer acquisition cost explained
CAC, or customer acquisition cost, is what it costs to win one new customer. Here is what CAC means, the paid, blended and fully loaded versions, a worked example, how it differs from CPA and how to tell whether yours is too high.
CAC, or customer acquisition cost, is what you spend on sales and marketing to win one new customer. Add up those costs for a period and divide by the new customers won in it. Unlike CPA, which can count any conversion, CAC counts only first-time customers, so it is the number to set against lifetime value.
How do you calculate CAC?
| Version | Formula |
|---|---|
| Paid CAC | Paid media spend ÷ new customers from paid channels |
| Blended CAC | Total marketing spend ÷ all new customers |
| Fully loaded CAC | All sales and marketing costs, including salaries, agencies and tools ÷ all new customers |
Say which version you use. Fully loaded CAC is the honest input for the LTV to CAC ratio and payback, while paid CAC is useful for comparing channels.
CAC example
An illustrative quarter for a UK B2B software company:
- Paid media: £60,000. Content and events: £15,000.
- Sales and marketing salaries spent on new business: £75,000.
- New customers: 50, of which 40 came through paid channels.
- Paid CAC: £60,000 ÷ 40 = £1,500.
- Fully loaded CAC: £150,000 ÷ 50 = £3,000.
The fully loaded figure is double the paid one. Budget decisions made on paid CAC alone would underestimate what growth really costs.
What is a good CAC?
One your customers pay back. A good CAC is low relative to the gross margin a customer generates over their life, which is why it is judged through the LTV to CAC ratio and the CAC payback period rather than as a standalone number. The CAC payback calculator shows how many months yours takes to recover.
CAC vs CPA
CPA is the cost of any tracked action, such as a lead, sign-up or purchase, and can include repeat buyers. CAC counts only new customers and usually spans the whole funnel. A B2B team might pay £60 per lead in CPA terms and £3,000 per closed customer in CAC terms.
How Grower helps
Grower sets budgets by month, quarter or year and by campaign group, compares them with live spend from connected channels and ranks channels by CPA, cost and conversions. The B2B SaaS page includes a CAC payback calculator.
Frequently asked questions
What costs should be included in CAC?
For fully loaded CAC, include paid media, agency and freelancer fees, marketing and sales tools, content production, events and the share of sales and marketing salaries spent winning new business. Leave out the cost of serving existing customers, such as account management. Whatever you choose, keep the definition fixed so CAC trends stay comparable.
How is CAC different for ecommerce and SaaS?
Ecommerce brands usually track paid CAC on first orders and compare it with first-order contribution and repeat purchase rates. SaaS companies track fully loaded CAC per closed account and compare it with subscription gross margin over time, through LTV to CAC and payback months. The formula is the same, but the costs and time horizon differ.
Why is my CAC rising?
Common causes are higher media costs in peak seasons, creative fatigue lowering click and conversion rates, audiences saturating as you scale, and attribution changes that shift which customers count as new. Check CPM, CTR and conversion rate separately to find which step moved, then fix that step rather than cutting spend everywhere.
See how long your CAC takes to earn back with the free CAC payback calculator.