What is Customer Acquisition Cost?
CAC — how much it costs, on average, to get one new paying customer.
Customer Acquisition Cost (CAC) is your total sales and marketing spend divided by the number of new customers it brought in. Spend $1,000 on ads and get 20 customers, and your CAC is $50.
CAC only matters next to what a customer is worth over time (their lifetime value). If it costs $50 to acquire a customer who spends $500 with you, that's a great business. Reverse it and you're paying for the privilege of losing money.
Lowering CAC — through word of mouth, referrals, and organic reach — is one of the highest-leverage things a business can do. Memes, for the record, are a famously cheap acquisition channel.
Related terms
Definitions from the Business Dog Glossary — educational, occasionally satirical, never financial advice.