What does CAC mean in tech?

CAC stands for Customer Acquisition Cost. It is the average amount of money a company spends on marketing and sales to acquire one new customer. You calculate it by dividing total marketing and sales expenses by the number of new customers acquired in a given period.

How do you calculate CAC?

The formula is: Total Marketing and Sales Expenses divided by Number of New Customers = CAC. For example, if you spent $50,000 on marketing in one month and gained 250 customers, your CAC would be $200 per customer.

Why is CAC important in business?

CAC helps companies understand if their marketing strategy is efficient and whether the business model is profitable. If CAC is too high relative to the profit from each customer, the company may not be sustainable. It is also used to compare the effectiveness of different marketing channels.

There is no universal good CAC because it depends on your business model, pricing, and industry. However, a common benchmark is that your CAC should be recovered within 12 months, and the ratio of LTV (lifetime value) to CAC should be at least 3:1.

How do you reduce CAC?

You can reduce CAC by improving conversion rates, using more efficient marketing channels, optimizing your sales funnel, increasing referrals, or improving product quality so customers stay longer and generate more revenue.

CAC meaning in tech — Customer Acquisition Cost explained

Commonness	4/5
Versatility	4/5
Formality	CasualFormalNeutral
Spoken ↔ Written	SpokenWrittenBoth
Directness ↔ Diplomatic	DirectDiplomaticDirect
Region	US and UK

Say it like this

✓We need to reduce our CAC by optimizing the conversion funnel.

✓Our CAC is too high compared to our LTV ratio.

✓The marketing team is focused on lowering CAC while maintaining quality.

Real examples

in a board meeting

"Our CAC has grown to $150 per user, which is unsustainable given our current pricing model."

in a product standup

"If we improve the onboarding experience, we can reduce our CAC by 20 percent."

in a marketing discussion

"We should compare the CAC from organic channels against paid advertising channels."

Don't say this

Handle with care. CAC is an acronym that can have different meanings depending on context (Customer Acquisition Cost in marketing, or Code Access Control in security). Always clarify which meaning is intended in your company.

✕Our CAC is very expensive.

✓Our CAC is very high.— CAC is a metric measured in currency, so you say 'high' or 'low', not 'expensive' or 'cheap'.

✕We need to increase our CAC to be more profitable.

✓We need to decrease our CAC to be more profitable.— A lower CAC is better for profitability. Increasing CAC means spending more to acquire customers, which reduces profit.

✕The CAC for this product don't look good.

✓The CAC for this product does not look good.— CAC is singular, so use 'does' not 'do' with the verb.

Other forms

noun

CAC

"Our CAC decreased by 15 percent after we launched the new referral program."

noun phrase

CAC ratio

"The CAC ratio between our mobile and web channels is significantly different."

Often used with

reduce CACTo lower the cost of acquiring customers through marketing or product optimization.

CAC payback periodThe number of months required for revenue from a customer to equal the CAC amount.

CAC to LTV ratioThe relationship between CAC and lifetime value; companies want this ratio to be 3:1 or higher.

improve CACTo make the metric better, which means lowering the cost per customer acquisition.

Similar words

customer acquisition costThe full form of CAC; used when explaining to non-technical stakeholders or in formal documentation.

acquisition costA shorter but less precise term that refers to the same metric.

Opposites

LTV (Lifetime Value)customer retention cost

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Practice

Try it

4 quick exercises

Pick the most natural phrasing

1. Your marketing manager says the company is spending too much to gain new customers. Which phrasing is most natural?

Our CAC is too high.Our CAC is too expensive.Our CAC needs to be improved in cost.Our CAC is not good price.

Complete the sentence

2. If we can lower our _______, we will be more profitable without changing our product price.

Spot the mistake

3. Which sentence uses CAC incorrectly?

We need to reduce our CAC by 25 percent.Our CAC are increasing every month.The CAC for mobile users is lower than desktop users.We can lower CAC by improving our conversion rate.

Rewrite naturally

4. Rewrite this sentence using CAC: 'We spend too much money to get each new customer, and we need to spend less money instead.'

Questions

Quick poll

Have you said "cac" in a standup this week?

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