Customer Acquisition Cost (CAC) is a metric that calculates the total cost of acquiring a new customer. It includes all sales and marketing costs (salaries, commissions, ad spend, tools) divided by the number of new customers acquired in a specific period.
The Formula
$$ \text{CAC} = \frac{\text{Total Sales & Marketing Costs}}{\text{Number of New Customers Acquired}} $$
The Context
CAC is a critical measure of efficiency, but focusing on it in isolation can be dangerous.
- Low CAC isn’t always good if it brings in low-value customers.
- High CAC might be acceptable for high-value, loyal enterprise clients.
The Value-First View
Instead of just trying to lower CAC by cutting costs (which often degrades the experience), focus on improving the efficiency of value flow.
- Trust Multiplication lowers CAC naturally through referrals.
- Natural Discovery lowers CAC by reducing reliance on paid interruption.
- Better Positioning lowers CAC by attracting the right people faster.
Sustainable CAC reduction comes from better relationships, not just cheaper ads.