What is customer acquisition cost (CAC) ?
CAC is the total cost a business incurs to acquire a new customer, including marketing, sales, and onboarding expenses.
Customer Acquisition Cost (CAC) is calculated by dividing total sales and marketing spend by the number of new customers acquired in a period. It is a key efficiency metric used alongside CLV to assess growth sustainability.
Example: A SaaS company spends $500,000 on sales and marketing in a quarter and acquires 250 new customers. The CAC is $2,000 per customer. If the average CLV is $20,000, the CLV:CAC ratio is 10:1.
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