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Overview

Customer Aquisition Cost (CAC) refers to the cost of acquiring a new customer.

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What is Customer Acquisition Cost (CAC)?

Customer Aquisition Cost (CAC) is the sales and marketing cost to acquire a new customer. Spending the right amount of money on customer acquisition is essential, as increasing CAC doesn’t always lead to more customers.

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How to calculate CAC

To calculate your CAC, divide the total amount spent on sales and marketing to acquire new customers by the number of new customers.

CAC Formula

Customer Acquisition Cost (CAC) = $ Spent on Acquiring New Customers / # of New Customers

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Relate Content: LTV

What is Lifetime Value (LTV)?

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Why CAC and LTV are important?

You can check the profitability of your product by considering the LTV:CAC ratio. It is ideal when the LTV is greater than the CAC, which means that the revenue you generate from a customer is greater than the cost of acquiring the customer. Therefore, you can still profit with a higher LTV even with a high CAC. On the other hand, if you have a low LTV, you might have low profitability even with a low CAC.
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