Customers and pricing
CAC (customer acquisition cost)
What it costs, on average, to win one new customer.
Facts checked against sources onWhat does CAC (customer acquisition cost) mean?
Customer acquisition cost is total sales and marketing spending to win new customers in a period, divided by the number of new customers won. Spend 50,000 and win 1,000 customers, and CAC is 50. It only makes sense next to what a customer is worth over time (CLV).
Where does it come up in case interview prep?
- Unit economics in any businessLesson in How industries work: the toolkit
- Business models: who pays, and for whatLesson in How industries work: the toolkit
- Fixed and variable costs, operating leverage, and unit economicsLesson in Business basics for non-business learners
- Industry primers: airlines, pharma, software, energyLesson in Business basics for non-business learners
- Retention and cohorts: why keeping customers beats winning themLesson in Customers and growth: the economics of marketing
- Marketing return: CAC, payback, incrementality, and why last-click credit misleadsLesson in Customers and growth: the economics of marketing
- Founders and startup operatorsLesson in The same acumen in other roles
- E-commerce players, trends, and how to crack the casesLesson in E-commerce, marketplaces, and quick commerce
Related terms
- CLV (customer lifetime value)The profit a customer is expected to bring over the whole relationship.
- Unit economicsThe revenue and cost of one unit: one product, order or customer.
- TAM, SAM and SOMTotal market, the part you can serve, and the part you can win.
- Market shareOur sales as a share of total market sales.
- Relative market shareOur share divided by the largest competitor's share.
- Penetration rateThe share of potential customers who already use the product.
- Share of walletOur share of what one customer spends in the category.
- ARPU (average revenue per user)Revenue divided by the average number of users.
Learn it in context
See CAC (customer acquisition cost) at work in a lesson from How industries work: the toolkit, with checks as you go.
Spotted something wrong or out of date? Report a mistake. We check every report and correct the page.