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Customer Acquisition Cost (CAC)

What is Customer Acquisition Cost (CAC)?

Customer acquisition cost (CAC) measures the cost associated with acquiring a new customer. This metric includes all marketing, sales and other related expenses divided by the number of new customers acquired during a specific period. Understanding CAC is essential for businesses to evaluate the effectiveness of their marketing strategies and the overall efficiency of their customer acquisition efforts.

A lower CAC indicates that a company is acquiring customers more cost-effectively, which is crucial for long-term profitability. Companies often strive to reduce CAC while increasing customer lifetime value (CLV) to maximize returns on investment. By analyzing CAC alongside other metrics, businesses can make informed decisions about budget allocation, marketing channels and sales strategies.

Related terms

30-Day and 13-Week Operating Cash Burn
30-day and 13-week operating cash burn are also known as the “burn rate.” These are the rates at which a business consumes its cash reserves when it isn’t bringing in profit. 
Accounts Payable Days
Accounts Payable Days (AP Days), also referred to as Days Payable Outstanding (DPO), is a financial ratio that measures the average time a company takes to pay its suppliers or vendors for credit purchases.
Accounts Payable Turnover
Accounts payable turnover explains how many times a business pays its creditors in a set timespan. Companies can use this metric to measure their short-term liquidity.
Accounts Receivable Turnover
The accounts receivable turnover ratio (or debtor turnover ratio) allows businesses to evaluate their debt collection efficiency.
Advanced Reporting
Advanced reporting refers to a sophisticated approach to generating and analyzing reports using advanced tools, techniques, and technologies.
Annual Recurring Revenue (ARR)
Annual Recurring Revenue (ARR) is a key metric used by subscription-based businesses to track and measure their predictable, recurring revenue streams over a one-year period.