GuideThe numbers leadership asks about
CAC
Definition
Customer acquisition cost: everything a company spends to win new customers in a period, divided by the number of new customers it won in that period. The arguments are over what counts as everything.
How it’s calculated
Add up the full cost of acquisition for the period: media spend, agency fees, the salaries of the people running it, tools, creative production. Divide by new customers won in the same period. That is blended CAC. Paid CAC narrows both sides: media spend only, divided by the customers attributed to paid channels. Blended prices what growth costs the company; paid prices what the next krone of media buys. When a CAC is understated, the mechanism is the numerator: the platform’s spend figure stands alone, and salaries, agencies, tools and production have become free. I tend to use blended CAC when explaining the number to a board, and paid CAC when moving budget between channels.
What to watch for
Reconcile the CAC in the deck with the ad account and the P&L. If it matches platform spend to the krone, the salaries, agency fees, tools and production sitting in the P&L were left out, and the real figure is higher by exactly those lines. Check the denominator for returning customers counted as new; a reactivated customer flatters CAC without any acquisition taking place. And check which version last quarter’s deck used: blended and paid differ by roughly the size of the payroll, so a switch between them moves the trend line more than performance does.
The question you ask
“What is in the numerator: media spend only, or salaries, agencies, tools and production as well?”