What is CAC (Customer Acquisition Cost)?
CAC stands for Customer Acquisition Cost and represents the average cost to acquire one new customer. It includes media and, ideally, major production/agency costs. Keep CAC aligned to LTV and payback windows.
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.
Meta Information
- Primary Keyword: CAC (Customer Acquisition Cost)
- Secondary Keywords: cost to acquire a customer, CAC formula
- Target Word Count: 900–1,100 words
- Meta Title: What is CAC? Customer Acquisition Cost Explained | Marpipe
- Meta Description: CAC measures what you spend to acquire a customer. Learn the formula, targets, and how creative/feed quality lowers CAC.
- URL: marpipe.com/ad-glossary/cac-customer-acquisition-cost
# What is CAC (Customer Acquisition Cost)?
CAC stands for Customer Acquisition Cost and represents the average cost to acquire one new customer. It includes media and, ideally, major production/agency costs.
Keep CAC aligned to LTV and payback windows.
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.
How to Calculate CAC
- Formula: CAC = Total Acquisition Costs ÷ Number of New Customers
- Segment by channel and product category; blended CAC can hide issues.
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 CAC works
CAC works by dividing total acquisition costs by the number of new customers over a period. Inputs include media and, consistently, major production or agency costs when relevant. Traffic quality, creative clarity, and checkout UX determine conversion, which drives CAC up or down. Value‑based bidding can raise AOV and allow higher CPCs while keeping CAC in range. Segmentation by channel, campaign, and product set reveals where acquisition is efficient. Use payback windows to ensure CAC aligns with cash constraints.
Best practices
- Improve feed quality to raise intent (price, category, reviews).
- Use product-forward creative and clear offers.
- Separate prospecting from retargeting when reading CAC.
- Track CAC by new customer share, not just orders.
- Pair CAC with payback period for capital discipline.
How to Calculate CAC
- Formula: CAC = Total Acquisition Costs ÷ Number of New Customers
- Segment by channel and product category; blended CAC can hide issues.
How Marpipe Helps
- The Challenge: Lowering CAC requires improving conversion rates and creative relevance, but building high-performing creative variants manually is slow. Catalog ads can reduce CAC through product-level personalization, but managing feed quality and templates becomes complex. Testing which creative elements improve conversion and lower CAC requires manual tracking.
- Marpipe's Solution: Marpipe's enriched catalog feeds improve product relevance, which raises conversion rates and lowers CAC. Catalog creative templates add price clarity, review stars, and sale badges that improve conversion by setting proper expectations. Product-level video adds engagement that improves conversion without manual video production. Performance analytics show which templates and product attributes drive the lowest CAC by channel and audience segment.
- Proof Points: Brands using Marpipe's catalog creative see average CAC reductions of 20-30% through improved conversion rates and creative relevance. The platform's enriched feeds and templates ensure ads show highly relevant products that convert more efficiently.
- CTA: Explore Enriched Catalogs and see how Marpipe reduces CAC through improved conversion rates and creative quality.
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.
