GLOSSARY

What is customer acquisition cost (CAC)?

Customer acquisition cost (CAC) is the total sales and marketing spend it takes to win one new paying customer. You calculate it by dividing everything you spent on acquiring customers in a period by the number of customers you gained. It tells you whether growth is actually profitable.

CAC goes further than cost per lead, because most leads never buy. It counts the full cost of turning strangers into customers, including the leads that did not convert along the way.

CAC only means something next to what a customer is worth to you over time. If it costs more to win a customer than they will ever pay you, the model loses money no matter how many you acquire.

You lower CAC by qualifying earlier, responding faster, and converting more of the leads you already pay for, rather than simply spending more at the top of the funnel.

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