CAC Definitions

This article will explain Customer Acquisition Cost (CAC), the methodologies Decile uses to calculate CAC, and how our clients utilize CAC within Decile Reports.

What is CAC?

Customer Acquisition Cost (CAC) measures how much a brand has spent to acquire a new customer via paid advertising channels within a certain period.

CAC Methodologies

There are several "market standard" ways to calculate CAC. You can think of each methodology as a different lens through which to look at your business. Our CAC reports provide you with the full range of market standard options so that you have the whole picture.

• Cost of transaction (light blue) is a calculation that should primarily be used for benchmarking. Cost of transaction is not a CAC metric because it accounts for all customers. It is calculated by dividing your total marketing spend by all transactions in a specific period. This metric is a good benchmark because it represents the lowest your CAC could ever be, and the closer one's CAC is to this number, the more efficient a company is utilizing its paid spend to acquire new customers.
• CAC - All New (maroon)  is another calculation that should primarily be used for benchmarking. It is calculated by dividing your total marketing spend by new customers acquired via paid (last touch) in a period. This number ignores multi-touch customer journeys, resulting in the metric overstating your acquisition cost. It is a good benchmark because it represents the theoretical upper bound of your true CAC value. The closer one's CAC is to this number, the less efficient a company is utilizing its paid spend to acquire new customers.
• CAC - New Via Paid (green line) - is the most common method for calculating CAC. It is calculated by dividing your total marketing spend by the number of new customers over a particular period. The benefit of this calculation is that it does not require purchase attribution. However, as a result, this method will understate your acquisition cost because it assumes all of your new customer transactions were generated by paid advertising. This calculation also includes all your spend and does not distinguish between your paid spend that went toward new customers vs. your spend that went to customer retention.

Utilizing CAC within Decile Reporting

Once you have decided on the CAC value that works best for your business our CAC. LTV, and Payback Report allows you layer your CAC on top of additional key business metrics such as LTV, AOV and Cohort values. This reporting allows our brands to view their business through the lens of profitability.