Glossary / Definition
Customer Acquisition Cost (CAC).
The cost associated with acquiring a new customer.
Customer Acquisition Cost (CAC) represents the total cost of acquiring a new customer, including marketing expenses, sales costs, affiliate commissions, and associated overhead. This metric is essential for determining the profitability of different acquisition channels and commission structures.
Understanding CAC helps merchants set appropriate commission rates and helps affiliates understand the value they provide to the business. When affiliate-driven CAC is lower than other channels while maintaining quality, it demonstrates the efficiency and value of affiliate partnerships.
CAC analysis should include both direct costs (commissions, tracking fees, creative development) and indirect costs (program management, support resources). The ratio of CLV to CAC is a key indicator of program sustainability and growth potential, with healthy ratios typically exceeding 3:1.
Related terms
- Affiliate An individual or company that promotes products for a merchant in exchange for a commission.
- Affiliate Marketing A performance-based marketing strategy where affiliates earn commissions by promoting a merchant's products or services.
- Affiliate Network A platform that connects merchants with affiliates to facilitate affiliate marketing partnerships.
- Affiliate Program A system where a merchant rewards affiliates for driving traffic or sales through their marketing efforts.
- Commission The fee paid to an affiliate for generating a specific action, like a sale or lead.
- Click-Through Rate (CTR) The percentage of people who click on an affiliate link compared to those who view it.
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