Customer acquisition cost

Customer acquisition cost (CAC) is the cost of winning a customer to purchase a product or service. As an important unit economic, customer acquisition costs are often related to customer lifetime value (CLV or LTV).

With CAC, any company can gauge how much they’re spending on acquiring each customer. It shows the money spent on marketing, salaries, and other things to acquire a customer. Keep an eye on CAC so it doesn’t get out of control. For example, no rational company would spend $500 to acquire a new customer with an expected LTV of $300 because it would drain $200 of value per customer acquired.

CAC, combined with LTV is a frequently compared metric, particularly for SaaS companies. They can manage their expenses, see their growth, predict their future moves, and expand if the business allows.