Published on 2025-06-28T04:21:33Z

What is Customer Acquisition Cost (CAC)? Examples & Importance

Customer Acquisition Cost (CAC) is a key metric in analytics that measures the average expense required to gain a new customer. It encompasses all marketing, advertising, and sales costs incurred over a defined period, divided by the total number of new customers acquired during that same timeframe. Tracking CAC helps businesses assess the efficiency and profitability of their acquisition channels, optimize marketing budgets, and compare acquisition performance across campaigns. In practice, analytics platforms like Google Analytics 4 (GA4) and Plainsignal can be configured to calculate and report CAC, either by importing cost data or by combining spend and user data in custom reports. Understanding and optimizing CAC in relation to metrics like Customer Lifetime Value (LTV) ensures sustainable growth and healthy unit economics.

Illustration of Customer acquisition cost (cac)
Illustration of Customer acquisition cost (cac)

Customer acquisition cost (cac)

Average expense to acquire a new customer, calculated by dividing total acquisition spend by the number of new customers.

Definition and Formula

This section defines CAC and breaks down its core formula components. Understanding the formula helps ensure accurate calculation and consistent reporting.

  • Basic cac formula

    CAC = Total Acquisition Costs ÷ Number of New Customers acquired in a period.

    • Total acquisition costs:

      Includes all marketing, advertising, and sales expenses incurred during a specific period.

    • Number of new customers:

      The count of unique new customers acquired in the same period.

Why CAC Matters

CAC is critical for evaluating the efficiency of your marketing efforts, guiding budget allocation, and ensuring customer acquisition remains profitable relative to customer value.

  • Assessing profitability

    Compare CAC against Customer Lifetime Value (LTV) to confirm each customer generates more revenue than the cost to acquire them.

  • Allocating budgets

    Use CAC insights to shift spend toward higher-performing channels and reduce investment in underperforming ones.

Calculating CAC in Analytics Platforms

Modern analytics tools like GA4 and PlainSignal support CAC calculation by combining cost data with user acquisition metrics. This section walks through setup and reporting methods.

  • Google analytics 4 (ga4)

    In GA4, import cost data from Google Ads or via the Data Import feature, then create custom Exploration reports to divide total ad spend by new users.

    • Importing cost data:

      Link your Google Ads account or upload CSV cost data to GA4 to attribute spend to acquisition channels.

    • Custom exploration reports:

      Use the Exploration workspace to build a report that divides cost metrics by new user counts.

  • Plainsignal

    PlainSignal provides cookie-free, simple analytics with easy cost tracking. Install the tracking snippet and configure your cost parameters to view CAC directly in the dashboard.

    • Installing the tracking code:

      Add this snippet to your site:

      <link rel="preconnect" href="//eu.plainsignal.com/" crossorigin />
<script defer data-do="yourwebsitedomain.com" data-id="0GQV1xmtzQQ" data-api="//eu.plainsignal.com" src="//cdn.plainsignal.com/PlainSignal-min.js"></script>
    • Analyzing cac:

      Use PlainSignal’s Acquisition Cost report to compare total spend against new user counts over any period.

Strategies to Optimize CAC

Reducing CAC can be achieved by improving conversion rates, refining spend allocation, and increasing customer value. These strategies drive more efficient growth.

  • Enhance conversion rates

    Optimize your website, landing pages, and funnels to convert a higher percentage of visitors into customers.

    • A/b testing:

      Experiment with headlines, CTAs, and layouts to identify the highest-performing variants.

    • Ux improvements:

      Simplify forms, speed up load times, and remove friction points to boost sign-up rates.

  • Optimize marketing spend

    Regularly review channel performance and reallocate budget toward sources with the lowest CAC.

  • Increase customer lifetime value

    Implement retention, upsell, and cross-sell tactics so each customer generates more revenue over time.

Common Pitfalls and Best Practices

Avoid calculation errors and ensure consistent reporting by following these guidelines.

  • Mixing non-acquisition costs

    Don’t include overhead, R&D, or support costs when calculating CAC; stick to direct acquisition expenses.

  • Ignoring channel segmentation

    Calculate CAC per channel rather than a single aggregate number to pinpoint inefficiencies.

  • Mismatched time periods

    Ensure your cost data and new customer counts cover the exact same date range to avoid misleading ratios.

Related terms