Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) measures the total cost of acquiring a new customer, including all marketing and sales expenses. It's calculated by dividing total acquisition costs by the number of new customers acquired in a period. CAC should be compared against customer lifetime value (LTV) to ensure profitability—ideally, LTV should be 3x CAC. Effective CAC optimization involves channel efficiency analysis, lead quality improvement, and conversion funnel optimization. Lower CAC can be achieved through organic growth strategies, referral programs, and targeted advertising. Regular CAC monitoring helps allocate marketing budget effectively across channels.