What is Customer Acquisition Cost?

Customer Acquisition Cost, explained

Customer acquisition cost is calculated by dividing total sales and marketing spending over a period by the number of new customers gained in that period. Costs can include advertising, sales salaries, commissions, marketing tools, events, and agency fees. Companies often calculate CAC separately for each channel, such as paid search, social media, or referrals.

For example, if a meal kit startup spends 30,000 dollars on marketing in a month and gains 600 new subscribers, its CAC is 50 dollars. CAC is most meaningful when compared with customer lifetime value, the total profit a typical customer brings over time. If acquiring customers costs more than they are worth, growth loses money. Lowering CAC usually involves better targeting, improved conversion rates, and referral or word-of-mouth programs.