Terms of Trade · Edition 1: The PE deck
CAC. Customer acquisition cost
Definition
Customer acquisition cost: the total spent on acquiring customers in a period, divided by the number of new customers acquired in the same period. The definition is simple; the argument is over what goes in the numerator and who counts as new.
Field note
CAC is where your budget goes to die. It is the measure of everything you have spent divided by the new customers who turned up, whether the spend acquired a customer or not, so the agency retainer, the brand campaign and the biscuits all land in the same number. How exactly did the biscuit budget attract the Gen A consumer?
Board question
What is in the numerator, and is the denominator new customers or every customer who happened to order?
Applied through
Commercial Discipline in the Cat’s Whiskers, and the acquisition-cost fact that every growth assumption in a deck rests on.
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