Customer Acquisition Cost (CAC)

Definition of Customer Acquisition Cost

Customer acquisition cost (CAC) is a key metric for any business that wants to grow and succeed. CAC measures how much money a company spends to acquire a new customer. It is calculated by dividing the total marketing and sales expenses by the number of new customers acquired in a given period.

Why is CAC important? CAC helps businesses evaluate the effectiveness and efficiency of their marketing and sales strategies. A low CAC means that a company can acquire customers with less spending, which implies a higher return on investment (ROI). A high CAC means that a company has to spend more money to attract customers, which reduces the profitability and scalability of the business.

How can businesses reduce CAC?

There are many ways to lower CAC, depending on the industry, product, and target market. Some common strategies are:

– Improving the quality and relevance of the content and offers on the website and social media platforms
– Optimizing the conversion rate of the landing pages and forms
– Leveraging referrals, testimonials, and reviews from existing customers
– Implementing email marketing campaigns and newsletters to nurture leads and increase retention
– Using analytics tools and data to measure and improve the performance of marketing and sales campaigns


CAC is not the only metric that businesses should track and optimize. It is also important to consider the customer lifetime value (CLTV), which is the estimated revenue that a customer will generate over their relationship with the business. The ratio of CLTV to CAC indicates how much value a customer brings to the business compared to how much it costs to acquire them. Ideally, businesses should aim for a high CLTV/CAC ratio, which means that they are creating loyal and profitable customers with minimal spending.