What is Customer Acquisition Cost?

Ruben Buijs

Founder & Digital Consultant

Written on Jul 31, 2023

2 minutes

Lead generation

Customer Acquisition Cost (CAC) refers to the total cost incurred by a business in acquiring a new customer. It is a crucial metric for businesses to understand how much they need to invest to acquire each customer. CAC helps businesses evaluate the effectiveness and profitability of their lead generation and marketing efforts.


Let's consider a few examples to understand how Customer Acquisition Cost works:

  1. Company A spent $10,000 on marketing campaigns, resulting in acquiring 100 new customers. The CAC for Company A would be $100 ($10,000 / 100).

  2. Company B invested $50,000 in lead generation activities and gained 500 new customers. In this case, the CAC would be $100 ($50,000 / 500) as well.

  3. Company C spent $5,000 on marketing and acquired 50 customers. The CAC for Company C would be $100 ($5,000 / 50).

In all these examples, the CAC remains constant at $100, indicating that each customer cost the company the same amount to acquire.


Understanding Customer Acquisition Cost is crucial for businesses for several reasons:

  1. Evaluation of Marketing Strategies: CAC helps businesses assess the effectiveness of their marketing strategies. By comparing CAC across different campaigns or channels, businesses can identify which marketing efforts yield the best results and optimize their budget allocation accordingly.

  2. Profitability Analysis: Calculating CAC enables businesses to determine whether the revenue generated from a customer exceeds the cost of acquiring them. This analysis helps businesses make informed decisions about pricing, product offerings, and customer retention strategies.

  3. Budget Planning: By knowing the CAC, businesses can estimate the budget required to acquire a desired number of customers. This information helps in setting realistic sales and marketing targets and ensures efficient allocation of resources.

  4. Performance Benchmarking: CAC serves as a benchmark to compare against industry standards or competitors. If a business has a significantly higher CAC compared to its peers, it may indicate inefficiencies in its lead generation or marketing strategies.

How to Use Customer Acquisition Cost

To calculate Customer Acquisition Cost, follow these steps:

  1. Determine the total cost incurred in acquiring customers during a specific period. This includes marketing expenses, sales team salaries, advertising costs, and any other relevant expenses.

  2. Count the number of new customers acquired within the same period.

  3. Divide the total cost by the number of new customers to calculate the CAC.

CAC = Total Cost / Number of New Customers

For accurate results, ensure that all costs associated with customer acquisition are included in the calculation.

Useful Tips

Consider the following tips when working with Customer Acquisition Cost:

  1. Segmentation: Analyze the CAC for different customer segments to identify high-value customers. This information can help businesses focus their efforts on acquiring customers with higher lifetime value.

  2. Lifetime Value (LTV): Compare the CAC with the Lifetime Value of a customer. If the CAC is significantly lower than the LTV, it indicates a healthy customer acquisition strategy.

  3. Improvement Strategies: Continuously monitor and analyze CAC to identify areas of improvement. Experiment with different marketing channels, campaigns, or pricing models to optimize customer acquisition costs.

  4. Referral Programs: Encourage customer referrals and leverage word-of-mouth marketing to acquire customers at a lower cost.


Customer Acquisition Cost (CAC) is a metric that measures the cost of acquiring a new customer for a business. It includes all the marketing and sales expenses associated with acquiring customers.
Customer Acquisition Cost is important because it helps businesses understand how much they need to invest to acquire new customers. It allows them to evaluate the effectiveness of their marketing and sales strategies and make informed decisions.
Customer Acquisition Cost is calculated by dividing the total marketing and sales expenses by the number of new customers acquired during a specific period. The formula is: CAC = Total Marketing and Sales Expenses / Number of New Customers.
Several factors can affect Customer Acquisition Cost, including the marketing channels used, advertising costs, sales team salaries, customer retention rate, and the average lifetime value of a customer.
To reduce Customer Acquisition Cost, a business can focus on optimizing its marketing and sales strategies, targeting the right audience, improving customer retention, increasing referrals, and leveraging cost-effective marketing channels.
The ideal Customer Acquisition Cost varies depending on the industry, business model, and target market. Generally, a lower Customer Acquisition Cost is desirable, but it should be compared to the average lifetime value of a customer to determine profitability.
Customer Acquisition Cost can be improved by implementing data-driven marketing strategies, analyzing and optimizing marketing campaigns, nurturing customer relationships, and continuously testing and experimenting with different marketing channels and tactics.
No, Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV) are different metrics. While CAC measures the cost of acquiring a new customer, CLV calculates the total revenue a business can expect from a customer over their lifetime. Both metrics are important for assessing business profitability.
Customer Acquisition Cost should be calculated regularly to monitor its trends and effectiveness. It is recommended to calculate CAC on a monthly, quarterly, or annual basis, depending on the business's sales cycle and marketing activities.
Yes, Customer Acquisition Cost can vary for different customer segments. Some customer segments may be more expensive to acquire due to higher advertising costs or longer sales cycles. It is important to analyze and track CAC for each customer segment separately.

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 Customer Acquisition Cost
  4. Useful Tips
  5. Related Terms

Turn more website visitors into sales with no-code lead widgets

Get for free

Create your first Boei widget now

Get 20% more conversations and turn them into customers easily.
You don't need take our word for it, just try for free!



Trusted by 10,000+ businesses

Quick 5-min, no code setup

Jordi Ibrahim Dan Renaat Fran Nitesh