What is Customer Acquisition Cost?

Customer acquisition cost (CAC) is the total cost of acquiring a new customer. It is typically calculated by dividing the total amount of money that a company spends on marketing and sales efforts to acquire new customers by the number of customers acquired during that period.

CAC is an important metric for companies, as it helps to inform business case decisions about how much to invest in customer acquisition efforts and how to allocate resources. A high CAC can be a sign that a company is having difficulty attracting new customers or that it is spending too much on acquisition efforts relative to the number of customers it is acquiring. On the other hand, a low CAC may indicate that a company is effectively attracting new customers at a reasonable cost.

CAC is often used in conjunction with other metrics, such as customer lifetime value (CLV), to assess the profitability of acquiring new customers. By comparing CAC to CLV, a company can determine whether the investment in acquiring new customers is likely to be recouped over the lifetime of the customer relationship.