Customer Acquisition Cost (CAC)

Customer acquisition cost (CAC) is the total sales and marketing cost required to acquire one new customer, calculated as acquisition spend divided by new customers acquired in the same period.

How it works

A complete CAC includes media spend, agency and tool costs, and the sales and marketing payroll behind acquisition, not just ad spend. CAC is most useful segmented: by channel, campaign, product line, and customer type, because a blended average hides which acquisition paths are profitable. CAC only becomes meaningful next to customer lifetime value; the LTV to CAC ratio determines whether growth is building value or buying it.

Why it matters

A business that does not know its true CAC by channel cannot allocate budget rationally. Rising CAC is also the early warning that a channel is saturating and diversification is due. Learn more about our performance marketing agency.