Definition
CAC (customer acquisition cost)
CAC, or customer acquisition cost, is the average amount a business spends to win one new customer. It includes ad spend, marketing, and sales effort divided by the number of customers gained. Comparing CAC to lifetime value shows whether growth is profitable.
CAC tells you what it costs to add a customer. If you spend 1,000 dollars on ads and marketing in a month and gain 10 customers, your CAC is 100 dollars. Keeping this number in check is essential to profitable growth.
CAC only makes sense next to lifetime value. If a customer is worth 500 dollars and costs 100 to acquire, the math works. If CAC climbs above LTV, you are losing money on every new customer, a sign to fix conversion, follow-up, or targeting.
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