What is Customer Acquisition Cost (CAC)?
Customer acquisition cost (CAC) is the average total cost of winning a new customer, calculated by dividing all sales and marketing spend over a period by the number of customers acquired in it. It measures how efficiently a business converts investment into new customers.
Reviewed by Gensudo Team · 23 July 2026
In more depth
A complete CAC includes not just advertising spend but sales salaries, tooling and overhead attributable to acquisition. It is most meaningful alongside customer lifetime value (LTV): the LTV-to-CAC ratio indicates whether a business is fundamentally profitable per customer, with a ratio near three to one often cited as healthy. CAC usually varies sharply by channel and segment, so blended figures can mislead.
Why it matters
A product can grow rapidly and still be unsustainable if each customer costs more to acquire than they are worth. Tracking CAC, especially against LTV and by channel, tells a team which growth is profitable and which is buying revenue at a loss, and it directly informs pricing, go-to-market choices and how much can be spent to grow.
A product example
A SaaS company spends 200k on sales and marketing in a quarter and gains 500 customers, giving a CAC of 400. With an average LTV of 1,600, its 4:1 ratio suggests it can afford to invest more aggressively in its best-performing channels.
Documents where this shows up
Business Case for Heads of Product · Product-Market Fit Assessment for Product Managers
Related terms
Customer Lifetime Value (LTV) · Churn Rate · Go-to-Market Strategy · KPI (Key Performance Indicator)