Customer Acquisition Cost (CAC)

What is Customer Acquisition Cost (CAC)?

Finance

Customer Acquisition Cost (CAC) is a metric that represents the total cost a business incurs to acquire a new customer. It includes all the expenses associated with sales and marketing activities that are intended to attract and convert new customers.

The formula for calculating CAC is as follows:

CAC = (Total cost of sales and marketing) / (Number of new customers acquired)

For example, if a company spends $100,000 on sales and marketing activities in a given period and acquires 1,000 new customers during that period, the CAC would be $100 per customer.

CAC can be a valuable metric for businesses to track, as it provides insights into the efficiency and effectiveness of their sales and marketing efforts. By comparing CAC to the Lifetime Value (LTV) of a customer, businesses can determine whether their acquisition costs are sustainable and whether they are acquiring customers profitably. Ideally, a business wants to keep CAC as low as possible while still acquiring customers with high LTVs.

More Terms

You Might Also Like

This is some text inside of a div block.

Bounce Rate

What is Bounce Rate?

Bounce rate is a web analytics metric that measures the percentage of website visitors who leave a website after viewing only one page, without interacting with any other pages on the site.

This is some text inside of a div block.

Direct-to-Consumer (DTC)

What is Direct-to-Consumer (DTC)?

DTC, or direct-to-consumer, refers to a business model where a company sells its products or services directly to consumers, bypassing traditional retail channels.

This is some text inside of a div block.

Return on Ad Spend (ROAS)

What is Return on Ad Spend (ROAS)?

Return on ad spend (ROAS) is a marketing metric that measures the revenue generated from advertising campaigns relative to the amount spent on those campaigns.