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Customer Acquisition Cost (CAC) is the total expense a business incurs to acquire a new customer. It includes all marketing and sales costs such as advertising, salaries, software, and other resources used to attract and convert prospects into paying customers.
Synonyms: Cost to Acquire a Customer, Customer Acquisition Expense, Customer Acquisition Spending, Cost per Acquisition
To find CAC, add up all the costs related to acquiring customers over a specific period and divide that by the number of new customers gained during the same time. For example, if a company spends $10,000 on marketing and sales in a month and gains 100 new customers, the CAC is $100.
Knowing CAC helps businesses understand how much they are spending to grow their customer base. It allows companies to evaluate if their marketing and sales efforts are cost-effective and to adjust strategies accordingly. A lower CAC means acquiring customers more efficiently.
If a startup spends $5,000 on online ads and $3,000 on sales team salaries in a quarter and gains 200 customers, the CAC is ($5,000 + $3,000) / 200 = $40 per customer. In contrast, a company with high advertising costs but fewer new customers will have a higher CAC, signaling a need to optimize spending.
