Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is one of those marketing metrics that sounds a bit dry at first, but once you understand it, you start to see it everywhere. CAC tells you how much it costs your business to win a new customer. That includes all the money spent on marketing, sales, tools, and sometimes even discounts, divided by the number of new customers you gained during a specific period.
You spent £20,000 on campaign spend, sales salaries, CRM software, and agencies in Q1, and you gained 200 new customers. Your CAC would be £100. Pretty simple maths. But while the calculation is straightforward, it can tell you a lot.
Knowing your CAC helps you understand whether your customer acquisition strategy is working or leaking budget. It forces businesses to look beyond vanity metrics like clicks or impressions and ask, “Is this channel actually helping us grow sustainably?” That’s especially important in companies where long sales cycles and high-touch models can make acquisition more expensive than expected.
Here are a few practical things to remember about Customer Acquisition Cost:
- Low CAC is excellent, but only if the customers you’re acquiring are the right ones.
- CAC is dynamic: it fluctuates with campaigns, channels, competitors, and markets.
- It gets interesting when paired with other metrics, especially Customer Lifetime Value (CLV).
- Measuring CAC by channel gives a clearer view of what’s really performing.