Customer acquisition cost
Fast track (Summarised definition)
Key business metric calculating total cost to acquire new customers, including marketing expenses, sales costs, and operational overheads, essential for evaluating marketing efficiency and ensuring sustainable business growth and profitability.
Full lap (Full definition)
Customer Acquisition Cost, commonly abbreviated as CAC, represents a key business metric that calculates the total cost to acquire new customers, including marketing expenses, sales costs, and operational overheads associated with customer acquisition efforts, essential for evaluating marketing efficiency and ensuring sustainable business growth and profitability.
The importance of CAC extends beyond cost measurement to encompass business sustainability assessment, marketing strategy evaluation, and long-term profitability planning. Understanding CAC enables businesses to evaluate whether customer acquisition efforts are economically viable and whether marketing investments generate positive returns over customer lifetimes.
CAC calculations involve dividing total acquisition costs by number of new customers acquired during specific periods, providing clear cost-per-customer measurement that enables strategic decision-making about marketing investment levels, channel selection, and business model sustainability across different acquisition strategies.
CAC components include advertising costs, marketing personnel expenses, sales team costs, marketing technology investments, and allocated overhead expenses that contribute to customer acquisition efforts. Comprehensive CAC calculation ensures accurate cost assessment and strategic decision-making based on complete financial picture.
CAC optimisation strategies encompass marketing channel refinement, conversion rate improvement, customer targeting enhancement, and operational efficiency gains that reduce acquisition costs whilst maintaining customer quality and lifetime value potential. These approaches focus on sustainable growth through efficient acquisition.
CAC analysis requires comparison with customer lifetime value (CLV) to ensure sustainable business models where customer value exceeds acquisition costs by acceptable margins. The CAC:CLV ratio indicates business model health and growth sustainability over time.
For businesses developing sustainable growth strategies, CAC measurement and optimisation proves essential for long-term success and profitability. Effective CAC management enables efficient customer acquisition, sustainable business scaling, and strategic marketing investment that delivers positive returns whilst building valuable customer relationships that support continued business growth and market expansion.