What Is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost (CAC) is the average cost your business incurs to acquire a new paying customer. It includes all marketing and sales expenses and is a critical metric for evaluating profitability and return on investment in PPC, CPL, and other paid traffic strategies.

Understanding Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) measures how much it costs to turn a prospect into a paying customer. It is calculated using the formula:

CAC = Total Marketing & Sales Costs ÷ Number of New Customers Acquired

This metric encompasses ad spend (such as Google Ads), salaries of sales staff, software tools, and related costs. Unlike Cost Per Lead (CPL), which only tracks how much it costs to generate a lead, CAC tracks the full journey to conversion and is a more holistic measure of marketing effectiveness.

If your CAC is too high compared to the customer’s lifetime value (LTV), your business model may be unsustainable.

Why It's Important

For landscaping companies, CAC tells you how efficiently you are converting interested leads into booked projects. If you’re spending $1,000/month on marketing and landing four new clients, your CAC is $250. Knowing this helps you understand how many jobs you need to cover acquisition costs and maintain healthy margins.

It’s especially important when evaluating the effectiveness of Conversion Rate Optimization (CRO) efforts. For instance, if CRO improvements help convert more leads from your landing page, your CAC goes down even if your CPL or CPC stays the same.

Tracking CAC alongside paid traffic metrics like CTR ensures your campaigns not only generate clicks and leads, but actual revenue-producing customers.

Example

You run a month-long PPC campaign and spend $2,000. From this, you generate 40 leads (CPL = $50). Out of those 40, 8 become paying customers. Your CAC would be:

$2,000 ÷ 8 = $250

Knowing this allows you to determine if each customer is worth more than $250 to your business in profit.

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