Customer Acquisition Cost (CAC)
The total cost of acquiring a new customer, including all marketing and sales expenses.
Why It Matters
CAC determines whether your growth is profitable and sustainable; if CAC exceeds customer value, you're losing money growing.
How It Works
Divide total sales and marketing spend (salaries, tools, ad spend, content) by the number of new customers acquired in that period. Blended CAC includes all customers; paid CAC isolates specific channel costs.
Real-World Example
A company spends $100,000 on marketing in Q1 and acquires 200 customers, resulting in a $500 CAC.
Common Mistakes
Excluding salaries and overhead from CAC calculation
Not calculating CAC per channel to identify efficiency
Related Terms
The total revenue a business can expect from a single customer account throughout their entire relationship.
The ratio of customer lifetime value to customer acquisition cost, indicating the return on acquisition investment.
The percentage of customers who stop using your product or cancel their subscription in a given period.
Customer Acquisition Cost (CAC) FAQs
What is a good CAC?
A good CAC depends on your LTV; generally, your LTV:CAC ratio should be at least 3:1 for a sustainable business.
How do I reduce CAC?
Improve conversion rates, invest in organic channels, optimize ad targeting, and implement referral programs.
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