What is Cost of Acquisition?

Ruben Buijs

Founder & Digital Consultant

Written on Aug 1, 2023

2 minutes

Customer Experience

The cost of acquisition, also known as customer acquisition cost (CAC), is a metric that measures the total expenses incurred by a business to acquire a new customer. It includes all the costs associated with marketing, advertising, sales, and any other activities directly related to attracting and converting potential customers into paying ones.


Here are a few examples to better understand cost of acquisition:

  1. Online Advertising: A company spends $1,000 on a digital advertising campaign targeting a specific audience. From this campaign, they acquire 50 new customers. The cost of acquisition per customer in this case would be $1,000 divided by 50, which equals $20.
  2. Sales Team Expenses: A business invests $10,000 per month in salaries, commissions, and other expenses for their sales team. During that month, the sales team successfully closes 100 new customers. The cost of acquisition per customer in this scenario would be $10,000 divided by 100, resulting in $100.


Understanding the cost of acquisition is crucial for businesses as it helps them evaluate the effectiveness and profitability of their customer acquisition efforts. By calculating this metric, companies can identify the most cost-effective marketing channels and strategies, allocate their resources wisely, and optimize their customer acquisition process.

How to Use It

To calculate the cost of acquisition, follow these steps:

  1. Define the Timeframe: Determine the period for which you want to calculate the cost of acquisition (e.g., monthly, quarterly, or annually).
  2. Gather the Data: Collect all the relevant expenses directly related to customer acquisition during the defined timeframe. This may include marketing campaign costs, advertising expenses, sales team salaries, and any other associated costs.
  3. Count the Customers: Determine the number of new customers acquired during the same timeframe.
  4. Calculate the Cost of Acquisition: Divide the total expenses by the number of new customers acquired. The result will be the cost of acquisition per customer.

Useful Tips

Here are some useful tips to consider when dealing with the cost of acquisition:

  • Track Multiple Channels: Monitor and analyze the cost of acquisition across different marketing channels to identify the most effective ones.
  • Lifetime Value: Compare the cost of acquisition with the lifetime value of customers to ensure profitability in the long run.
  • Experiment and Optimize: Continuously experiment with different strategies and optimize your customer acquisition process based on cost of acquisition data.


Cost of acquisition refers to the total expenses incurred by a business to acquire a new customer or client.
Cost of acquisition is important because it helps businesses understand the financial impact of acquiring new customers and allows them to make informed decisions about marketing and sales strategies.
Cost of acquisition is calculated by dividing the total marketing and sales expenses by the number of new customers acquired within a specific period of time.
Cost of acquisition refers to the total expenses incurred, while cost per acquisition refers to the average cost incurred for acquiring each individual customer.
Factors that contribute to the cost of acquisition include marketing and advertising expenses, sales commissions, cost of lead generation, and any other costs directly related to acquiring new customers.
Businesses can reduce their cost of acquisition by optimizing their marketing and sales strategies, targeting the right audience, improving customer retention, and enhancing their overall customer experience.
The definition of a good cost of acquisition varies depending on the industry and business model. Generally, a lower cost of acquisition is desirable, but it should be balanced with the lifetime value of the acquired customers.
Some limitations of cost of acquisition include not accounting for long-term customer value, not considering the impact of customer referrals, and not factoring in indirect marketing costs.
Businesses can track their cost of acquisition by implementing proper analytics and tracking systems, monitoring marketing and sales expenses, and regularly evaluating the effectiveness of their customer acquisition strategies.
Yes, cost of acquisition and customer acquisition cost are often used interchangeably to refer to the same concept.

Article by

Ruben Buijs

Ruben, the founder of Boei, leverages over a decade of consultancy experience at Ernst & Young to optimize lead generation. Boei specializes in converting website visitors into qualified leads. Outside of work, Ruben is passionate about crossfit and enjoys gaming occasionally.

Table of contents

  1. Examples
  2. Importance
  3. How to Use It
  4. Useful Tips
  5. Related Terms

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