Muze AI
Talk to SalesStart free trial
PlatformMuze MCPLiteResultsPricingTalk to SalesStart free trial

Glossary · Metrics

What is CAC?

Also known as Customer acquisition cost.

Definition

CAC (customer acquisition cost) is the full cost of winning a new customer, including ad spend, agency or staff time and acquisition tooling, divided by the number of new customers acquired in the same period. It differs from CPA in two ways: it counts new customers only, and it includes costs the ad platform never sees. CAC is almost always the larger and more honest number.

How it is calculated

CAC = Total acquisition cost ÷ New customers acquired

What to know

The common error is dividing ad spend by all purchases, which counts returning customers as acquisitions. If your repeat rate is high, that single mistake can halve the reported number and make an unprofitable channel look fine.

You will see a 3:1 LTV to CAC ratio quoted everywhere as the rule. We will not publish a target ratio, because the right one depends on your gross margin, how quickly the repeat revenue actually arrives, and whether you are funding growth from cash flow. A 2:1 that pays back in two months is a stronger position than a 4:1 that takes three years.

Related terms

CPACPA (cost per acquisition) is ad spend divided by the number of conversions. Spending $2,000 to generate 50 co...LTVLTV (customer lifetime value) is the total gross profit a customer generates across their whole relationship w...Payback periodPayback period is how long the gross profit from a customer takes to repay what you spent acquiring them. Spen...Contribution marginContribution margin is what is left from revenue after every cost that varies with the sale: product cost, shi...

Track this across every platform at once

Muze reads CAC and everything around it straight from your Meta, Google, Amazon and Shopify accounts, inside ChatGPT or Claude. Free to start.

See how Muze works