Customer acquisition cost (CAC)
What is customer acquisition cost?
Customer acquisition cost (CAC) is the total spent on sales and marketing in a period divided by the number of new customers won in that period. It can be calculated overall or per channel.
It is most useful next to customer lifetime value: a business is healthy when customers are worth comfortably more than they cost to acquire.
Why customer acquisition cost matters
CAC shows which channels are affordable to scale. Channels with a low CAC and good retention deserve more effort.
Customer acquisition cost example
In a month you spend $2,000 on ads, $1,000 on tools and $3,000 of salary time on outreach, and win 40 customers. CAC = $6,000 ÷ 40 = $150.
Related marketing terms
Customer lifetime value, LTV, estimates the total revenue or profit a customer brings over their whole relationship with a business.
Churn rate is the share of customers who stop using or paying for a product in a period, such as a month. Lower is better.
Conversion rate is the share of people who take a desired action, such as signing up, replying or buying, out of all who could have.
Marketing channels are the routes a business uses to reach customers, such as search, social, email, communities, creators, ads and sales.