Customer Acquisition Cost (CAC) is the total expense a business incurs to gain one new paying customer. This includes all marketing, advertising, and sales costs (e.g., ad spend, salaries, tools) divided by the number of customers acquired in a specific period.
Formula:
| CAC = | Total Marketing + Sales Costs |
| Number of New Customers Acquired |
Why It Matters:
- Profitability Check: Reveals if acquiring customers is sustainable (e.g., if CAC > customer lifetime value, the business loses money).
- Optimisation: Helps refine marketing strategies (e.g., shifting budgets from high-CAC channels like paid ads to lower-CAC tactics like referrals).
Benchmark:
- E-commerce: £10–£50
- SaaS: £100–£1,000+
CAC is the golden metric for growth efficiency.