Customer acquisition cost
Customer acquisition cost (CAC) is what you spent to acquire each customer. The headline number is usually blended CAC - total acquisition spend divided by customers acquired in the same period. The more useful breakdown is per-channel CAC, which tells you which channels are actually paying off.
The single most useful derived number is LTV:CAC. Healthy businesses run around 3:1 - £3 of lifetime value for every £1 of acquisition cost. Below 1:1 you’re paying to acquire customers. Above 5:1 you’re underspending and could grow faster. See customer lifetime value for the other half.
Blended vs per-channel CAC
Section titled “Blended vs per-channel CAC”Two views of the same data, both useful for different reasons:
- Blended CAC - total spend across all paid channels divided by total acquired customers. Useful for company-level ratio tracking against LTV. Hides which channels are profitable and which are subsidising the others.
- Per-channel CAC - acquisition spend per channel divided by customers attributed to that channel. Reveals the actual channel economics. Depends heavily on which attribution model you use, which means it’s directional rather than absolute.
Most stores eyeball blended CAC and trust per-channel CAC less than they should. Per-channel is the one that drives spend allocation decisions.
Why this matters for CRO
Section titled “Why this matters for CRO”CRO is a CAC efficiency lever. Lift conversion rate by 20% and you effectively reduced CAC by 17%, because the same spend now produces more customers. This is the strongest internal case for CRO investment - it lowers CAC across every paid channel simultaneously.
The flip side: CRO that lifts conversion rate by attracting lower-LTV buyers (discount-heavy offers, aggressive urgency) reduces CAC at the cost of LTV. The CAC:LTV ratio is what to watch, not CAC alone.
Where CAC maths goes wrong
Section titled “Where CAC maths goes wrong”- Treating CAC as a fixed number. It moves with traffic mix, season, ad auction dynamics, and brand strength. A “good CAC” today can be a bad CAC in three months without anything you did.
- Trusting platform-reported attribution. Facebook reports more conversions than actually happened. Google reports more than that. Per-channel CAC from in-platform numbers is systematically optimistic.
- Ignoring organic acquisition cost. “Organic” traffic isn’t free - SEO, content, and brand spend all created it. Stores that include only paid in CAC overstate the efficiency of the paid channels.
- Setting CAC targets without LTV context. The right CAC depends on what you can earn from the customer over time. A “low CAC” with terrible retention is a worse business than a “high CAC” with strong repeat purchase.
- Letting CAC drift up without challenging it. Auction dynamics push CAC up over time naturally. The CRO programme is one of the few levers that pushes back without raising spend.