Glossary · Marketing
What is Customer Acquisition Cost (CAC)?
Definition
Customer acquisition cost (CAC) is the average amount you spend on marketing and sales to win one new paying customer.
CAC = total sales and marketing spend ÷ number of new customers acquired
Why it matters
CAC shows whether your marketing is efficient. It is compared against what a customer is worth over time to see if growth is profitable.
A local gym spends $1,200 in a month on flyers, social ads, and a free-trial promotion and signs up 24 new members. CAC is $1,200 divided by 24, or $50. If each member pays $40 a month and stays about 10 months, they bring in $400, so the $50 spend is well justified.
Include all acquisition costs, such as ad spend, tools, and the time of anyone dedicated to selling. Track CAC by channel to see which ones deserve more budget.
Common mistakes
- !Excluding your own time or staff wages, which hides the true cost of winning customers.
- !Mixing existing-customer sales into the count and underestimating CAC.
Frequently asked questions
What is Customer Acquisition Cost (CAC)?
Customer acquisition cost (CAC) is the average amount you spend on marketing and sales to win one new paying customer.
How do you calculate CAC?
CAC = total sales and marketing spend ÷ number of new customers acquired
What mistakes do beginners make with CAC?
Excluding your own time or staff wages, which hides the true cost of winning customers. Mixing existing-customer sales into the count and underestimating CAC.
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