Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the total cost associated with convincing a potential customer to buy a product or service. This includes all marketing and sales expenses (advertising spend, salaries of marketers and salespeople, software costs, etc.) incurred over a specific period, divided by the number of new customers acquired during that period.

CAC = Total Sales and Marketing Costs / Number of New Customers Acquired

CAC is a critical metric for businesses to understand their profitability and the efficiency of their acquisition strategies. It's often compared with Customer Lifetime Value (CLV/LTV) to assess the long-term viability of a business model. It is broader than Cost Per Acquisition (CPA) as CPA usually refers to a specific campaign, while CAC looks at overall business costs.