Customer Acquisition Cost (CAC) measures how much a company spends to acquire each new customer. It's calculated by dividing total marketing and sales costs by the number of new customers acquired in a given period. If you spent $10,000 on marketing and gained 200 customers, your CAC is $50.
CAC is meaningless in isolation—it must be compared against Customer Lifetime Value (LTV). A healthy business typically has an LTV:CAC ratio of 3:1 or higher, meaning each customer generates at least three times what it cost to acquire them.
CAC varies dramatically by channel, customer segment, and competition. Paid social might have $30 CAC while SEO-driven customers cost $5 to acquire. Understanding CAC by channel helps allocate marketing budgets efficiently and identify unsustainable acquisition strategies.