Customer Acquisition Cost (CAC)
Customer acquisition cost (CAC) is the total sales and marketing spend in a period divided by the number of new customers won in that same period.
Also called: CAC, blended CAC
Why it matters
CAC tells a company how much it pays to win each customer, which decides whether growth is affordable. It is usually compared with customer lifetime value and with payback period, the months of gross margin needed to recover the cost. If CAC rises faster than deal size, a company can grow revenue while losing more money on each new customer.
Teams must decide what goes into the formula: salaries, commissions, tools, ad spend, agencies and events. Blended CAC includes all channels, while paid CAC counts only paid acquisition. CAC differs from cost per lead, which stops at the lead stage. Because B2B sales cycles are long, some teams lag the spend by a quarter to match it with the customers it produced.
Example
A software company spends $300,000 in a quarter on sales salaries, marketing tools, ads and events, and wins 60 new customers that quarter. Its CAC is $300,000 divided by 60, or $5,000. If each customer pays $500 a month and the company keeps $400 of that as gross margin, it recovers the $5,000 in about 12.5 months.
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