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Metrics & Analytics

CAC (Customer Acquisition Cost)

The total cost of acquiring a new customer, including marketing, sales, and related expenses.

Definition

Customer Acquisition Cost is the total investment required to acquire a new paying customer. It includes marketing spend, sales salaries and commissions, tools, content creation, and other acquisition-related costs divided by the number of new customers acquired. CAC is half of the fundamental unit economics equation for SaaS.

Why It Matters

CAC determines how much you can afford to spend on growth. Combined with LTV, it tells you whether your business model is viable. High CAC relative to LTV means you are losing money on every customer. Email can significantly reduce CAC by improving conversion rates throughout the funnel and reactivating churned customers for zero additional acquisition cost.

How It Works

Sum all acquisition costs for a period (marketing, sales, tools, overhead). Divide by the number of new customers acquired in that period. Track CAC by channel to understand which acquisition sources are most efficient. Compare CAC to first-year revenue and LTV to evaluate sustainability.

Best Practices

  • 1Track CAC by acquisition channel, not just overall
  • 2Include all relevant costs, not just direct ad spend
  • 3Calculate CAC payback period (months to recover CAC)
  • 4Use LTV:CAC ratio to evaluate channel efficiency
  • 5Invest in organic channels to reduce blended CAC over time
  • 6Improve activation and conversion to lower effective CAC
  • 7Track CAC trends to catch efficiency problems early

Improve Funnel Efficiency

Better email nurturing and onboarding increases conversion rates, lowering your effective CAC across all channels.

Learn More

Frequently Asked Questions

Email reduces CAC in several ways. Nurture sequences convert more leads without additional acquisition spend. Reactivation brings back churned customers for near-zero CAC. Referral campaigns generate new customers through existing ones. Better onboarding email increases activation, making each acquired lead more valuable.

Include marketing spend (ads, content, events), sales costs (salaries, commissions, tools), marketing and sales tooling, and attributed overhead. Some companies include only direct costs while others fully load CAC. Be consistent in your methodology.

CAC varies enormously by market and sales model. Self-serve PLG companies might have $50-200 CAC. Sales-assisted SMB might be $500-2000. Enterprise sales CAC can exceed $10,000. What matters is the ratio to LTV, not the absolute number.