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.
Use it at work
Talking about growth
- Our CAC went up after we started paid ads.
- We need to bring CAC down before we scale.
Comparing numbers
- LTV is three times CAC, which is healthy.
- CAC is much lower for referrals.
In a meeting
- How are we calculating CAC? Does it include sales salaries?
- What's our CAC for enterprise deals?
Don't say this
CAC is a metric measured in currency, so you say 'high' or 'low', not 'expensive' or 'cheap'.
Don't mix it up
| Term | What it is | Who writes or uses it | When |
|---|---|---|---|
| CAC | Cost to win one customer | Finance, marketing | Growth planning |
| LTV | Total value of one customer over time | Finance, marketing | Compared with CAC |
Practice
Try it
4 quick exercises
1. Your marketing manager says the company is spending too much to gain new customers. Which phrasing is most natural?
2. If we can lower our _______, we will be more profitable without changing our product price.
3. Which sentence uses CAC incorrectly?
4. Rewrite this sentence using CAC: 'We spend too much money to get each new customer, and we need to spend less money instead.'
Say it out loud
Phrase 1 of 3
"We need to reduce our CAC by optimizing the conversion funnel."
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More about CAC
Real examples(3)
- 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."
More mistakes(2)
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.
- ✕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 doesn't look good.
CAC is singular, so use 'does' not 'do' with the verb.
Other forms(2)
- CAC noun
"Our CAC decreased by 15 percent after we launched the new referral program."
- CAC ratio noun phrase
"The CAC ratio between our mobile and web channels is significantly different."
Often used with(4)
- reduce CAC · To lower the cost of acquiring customers through marketing or product optimization.
- CAC payback period · The number of months required for revenue from a customer to equal the CAC amount.
- CAC to LTV ratio · The relationship between CAC and lifetime value; companies want this ratio to be 3:1 or higher.
- improve CAC · To make the metric better, which means lowering the cost per customer acquisition.
Similar words(2)
- customer acquisition cost · The full form of CAC; used when explaining to non-technical stakeholders or in formal documentation.
- acquisition cost · A shorter but less precise term that refers to the same metric.
Opposites(2)
- LTV (Lifetime Value)
- customer retention cost
Questions(6)
- What is the full form of CAC?
- CAC stands for Customer Acquisition Cost. The total amount of money a company spends to acquire one new customer.
- 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.
- What is a good CAC?
- 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.
