Customer Acquisition Cost (CAC), explained properly.
How to calculate CAC
The formula is total marketing and sales costs divided by the number of new customers acquired. If you spent 10,000 pounds on marketing and sales last quarter and gained 50 new customers, your CAC is 200 pounds. There are three common variations: - **Blended CAC:** total spend across all channels divided by total new customers. The easiest to calculate. - **Paid CAC:** paid spend only, divided by customers attributed to paid channels. More precise for ROAS analysis. - **Channel-specific CAC:** spend on one channel divided by customers from that channel. Useful for budget allocation.
How CAC differs from CPA
CPA usually measures the cost per conversion within a single campaign. A campaign might show a 40 pound CPA. CAC measures the full business cost: salaries, software, content production and channel spend together. The same business with a 40 pound CPA might have a 180 pound CAC once everything is included.
Take this further
CAC is one of the most important metrics for any business running paid acquisition. We help clients track it cleanly alongside paid spend, so you can see the real cost of winning a customer, not just the cost of a click.
Customer Acquisition Cost (CAC): common questions.
What is a good CAC?
It depends entirely on customer lifetime value (LTV). The healthy benchmark is an LTV:CAC ratio of 3:1 or higher. If a customer is worth 600 pounds over their lifetime, a 200 pound CAC is healthy, 300 pounds is borderline, and 600 pounds or more means you are losing money on every customer.
How do I lower CAC?
Three high-impact levers. Improve conversion rates with better landing pages and sharper messaging. Increase average customer value through upsell, cross-sell and retention. Optimise your channel mix by shifting budget toward the channels with the lowest CAC for your business model.
Should I measure blended CAC or paid CAC?
Both, for different purposes. Blended CAC is the truer business metric. Paid CAC helps you allocate marketing spend across channels. Mature SaaS and ecommerce businesses typically report both.
How is CAC payback period calculated?
It is the number of months until a customer's contribution covers their CAC. If CAC is 200 pounds and an average customer contributes 50 pounds a month after costs, payback is four months. A shorter payback means a healthier business.
“I've had the pleasure of working with Chris on several SEO projects for my websites in the health field. He was definitely been able to demystify things so that I felt able to make decisions with him and feel confident they were the right ones. For a non-techie, that is worth gold! I look forward to working with Chris again and warmly recommend him to anyone who - like me - is unsure about all things SEO.”
“I was recommended by my branding partner to use Chris and his team last year. I can’t recommend them highly enough. They are very responsive , easy to communicate with and great at translating techy stuff when needed. They are now an essential part of my business model”
“We've been working closely with Chris, Hannah and the team for over 12 months now. As a small company with ambitious growth plans, it was incredibly important that we made the right choice on who to trust with our SEO. 18 months later, we're totally thrilled with our experience so far and our growing online presence within our market. We'd happily recommend BTT and their services to other SMEs. Drop them an enquiry!”
You work directly with the senior people who do the work, a small Bristol team you will actually get to know, not a call centre or an account manager relaying messages.
Meet the team →
