Customer Acquisition Cost
Customer acquisition cost (CAC) is the total cost of acquiring a new customer, including all marketing and sales expenses divided by the number of new customers gained in a period.
CAC answers a simple question: how much do you spend to get one new customer? The formula is: Total Marketing + Sales Costs ÷ Number of New Customers = CAC. If you spend $10,000 on marketing in a month and acquire 100 customers, your CAC is $100.
CAC varies dramatically by industry, business model, and channel. SaaS companies might have $200-$1,000 CAC, while e-commerce might be $10-$50. B2B enterprise sales can have CAC in the tens of thousands due to long sales cycles and relationship-based selling.
In practice
- A SaaS startup's CAC was $800 through paid search but only $150 through content marketing, they shifted budget from ads to content, reducing blended CAC from $600 to $250
- An e-commerce brand's Facebook Ads CAC increased from $25 to $65 after iOS privacy changes, they diversified into influencer marketing and email referrals to bring blended CAC back to $35
- A B2B company calculated that their $15,000 CAC was justified by a $180,000 average contract value (12:1 LTV:CAC ratio), but reduced it to $10,000 through a self-serve trial option
- A subscription service discovered that customers acquired through referrals had a $12 CAC vs $45 for paid ads, and also had 50% lower churn, they invested heavily in their referral program
Not sure how this applies to you?
A senior engineer walks your site, your search presence and the way enquiries reach you, then writes down the three things worth fixing first. You keep the document either way.