CAC (customer acquisition cost) is the price of a new customer. It differs from CPA in one important way: CPA counts every conversion, including from people who already buy from you. CAC counts only first-time customers, so it is the number you compare with what a customer is worth over time.
CAC vs CPA
| CPA | CAC | |
|---|---|---|
| Counts | Every attributed purchase | First-time customers only |
| Source | Usually Ads Manager | Usually your store and finance data |
| Answers | What does a sale cost? | What does a new customer cost? |
| Compare with | Margin per order | Customer lifetime value |
How to calculate it
- Choose the period, usually a month.
- Add up the acquisition spend. A narrow CAC uses Meta ad spend only. A fuller, blended CAC includes all paid media and can include agency fees, creative production and tools.
- Count first-time customers from your store in the same period, not purchases reported by Meta.
- Divide spend by new customers.
Say which version you use. A Meta-only CAC will always look better than a fully loaded one, and the two shouldn't be mixed in the same report.
Worked example
Example: a skincare brand's month.
| Line | Amount |
|---|---|
| Meta ad spend | ₹90,000 |
| Creative production | ₹15,000 |
| New customers (store data) | 200 |
| Returning customers | 150 |
| Meta-only CAC | ₹450 |
| Blended CAC | ₹525 |
Meta reports 310 purchases, so cost per purchase looks like about ₹290. But 150 of the store's buyers were returning, and Meta's count also includes some people who only viewed an ad. The real price of a new customer is closer to ₹450 to ₹525.
What is a good CAC?
There is no universal figure. A CAC is good when it is comfortably below the profit a customer brings over their lifetime. That comparison is the LTV:CAC ratio, and you can run it with the LTV:CAC calculator. If customers rarely return, CAC also needs to be below the contribution margin on the first order.
How to lower CAC
- Improve conversion rate on the landing page, which lowers the cost of every customer at once.
- Refresh creative before fatigue raises costs.
- Keep prospecting budgets aimed at new people and track NC-ROAS.
- Raise first-order value with bundles, so each new customer is worth more on day one.
To plan how much to spend at a given CAC, see how much to spend on Facebook ads.
Frequently asked questions
How do you calculate customer acquisition cost?
Divide your acquisition spend for a period by the number of new customers you won in that period. ₹90,000 of ad spend and 200 first-time customers gives a CAC of ₹450. State whether your spend figure includes only ads or also fees, creative and tools.
What is the difference between CAC and CPA?
CPA is the cost per conversion and counts every purchase, including from returning customers. CAC is the cost per new customer and counts only first-time buyers. CAC is usually higher, and it is the one to compare with customer lifetime value.
What is a good CAC for an e-commerce brand?
A good CAC is one comfortably below the profit a customer brings over their lifetime. Many brands use an LTV:CAC ratio of about 3 as a rule of thumb, but your own margins, repeat rate and cash position should set the target.
Should CAC use Meta's reported purchases?
It is better to count new customers from your store data. Meta's purchase count includes returning customers and some view-through conversions, and it misses orders it couldn't track, so it can make CAC look lower or higher than it really is.
