What is CAC (Customer Acquisition Cost)?

Understanding CAC

CAC reflects both traffic quality and conversion efficiency across the funnel. Catalog ads reduce CAC by matching products to intent and improving conversion with clear templates and product‑level video. Price clarity, reviews, and fast pages raise value per click and protect conversion rates. Audience quality and bidding strategy shape how much you pay for each opportunity. Read CAC by source and product set to see where spend actually acquires customers.

Treat CAC as a system metric influenced by creative, feed, targeting, and landing experience. Separate prospecting from retargeting when analyzing so you don’t mask acquisition costs with cheap returns. Align CAC targets to LTV and payback windows that fit your capital cycle. Improve inputs first (feed/creative) before tightening targets. Track CAC trends over time to validate durable gains, not promo blips.

Why CAC matters

CAC matters because it defines whether growth is sustainable. It must sit below contribution margin and LTV, or scale destroys value. It also informs budget allocation and pricing decisions across categories.

• Viability: CAC must sit below contribution margin and LTV.
• Scale: Sustainable CAC allows broader prospecting.
• Planning: Guides budget and pricing decisions.

How to Calculate CAC

• Formula: CAC = Total Acquisition Costs ÷ Number of New Customers
• Segment by channel and product category; blended CAC can hide issues.

Key Takeaways

• CAC (customer acquisition cost) is total acquisition spending divided by new customers acquired.
• Include all relevant costs (media, creative, tools, overhead) to avoid understating CAC.
• Segment CAC by channel and product category to identify efficient vs. expensive acquisition sources.
• Improve CAC by optimizing feed quality, creative relevance, and conversion rates.