Glossary
Customer acquisition cost
The average total sales and marketing spend required to acquire one new paying customer.
Also called: CAC
Customer acquisition cost is the average amount a business spends to acquire one new paying customer over a given period. It rolls up spend across channels into a single efficiency figure that can be tracked over time or compared across acquisition strategies.
The basic formula is total sales and marketing spend / number of new customers acquired for the same period. Some companies use a "fully loaded" version that includes salaries, tools, and overhead, while others report a media-only figure limited to ad spend; the two are not comparable, so it matters which definition a given number represents.
CAC is most meaningful next to customer lifetime value, commonly expressed as an LTV:CAC ratio, to judge whether growth is financially sustainable rather than just fast. It is also tracked by channel alongside return on ad spend to guide budget allocation, and improving conversion rate is one of the more direct ways to lower it without cutting spend. A common pitfall is relying on a single blended CAC figure, which can mask a mix of very efficient and very inefficient channels, and ignoring how long it takes to recoup that cost, known as the payback period.
Last reviewed September 19, 2026