Customer Acquisition Cost
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CAC = total sales and marketing costs / number of new customers acquired over the same period. It represents the average amount spent to convert one new customer, combining ad spend, salaries, tools, and other related costs.

Include all sales and marketing expenses tied to acquiring customers — advertising spend, marketing team salaries, sales commissions, software tools, and content production — but not costs unrelated to acquisition, like customer support or product development.

CAC alone doesn't tell you if acquisition spending is profitable — you need to compare it to CLV (what a customer is worth over their relationship with the business). A common benchmark is a CLV:CAC ratio of at least 3:1 for a sustainable business model.

As a company saturates its most responsive audience segments and competitors bid up ad prices, each additional customer typically costs more to acquire — a pattern known as diminishing returns on marketing spend. Rising CAC is a common signal to diversify acquisition channels.

Yes, dramatically — a B2B software company selling to enterprises might spend thousands of dollars per customer given long sales cycles and high contract values, while a low-cost consumer app might target a CAC of just a few dollars. Always benchmark CAC against your own industry and business model, not a universal number.