Customer Acquisition Cost
Customer Acquisition Cost (CAC) is the total sales and marketing spend needed to win one new customer over a given period. You calculate it by dividing all acquisition costs (ad spend, salaries, tools, and agency fees) by the number of new customers gained in that same period.
CAC is most useful when compared against Customer Lifetime Value: the LTV-to-CAC ratio shows whether the revenue a customer generates justifies the cost of acquiring them. Teams also watch the CAC payback period, the time it takes recurring revenue to recover that upfront cost.
A common pitfall is calculating CAC with marketing spend alone while omitting sales salaries, overhead, or discounts, which understates the true cost. Defining a consistent cost basis and time window keeps CAC comparable across channels and quarters.
Last updated: 14 June 2026