Customer acquisition cost

Customer acquisition cost (CAC) is the cost of persuading a customer to purchase a product or service. As an important business metric, customer acquisition costs are often related to customer lifetime value (CLV or LTV).

With CAC, a company can estimate how much they are spending on acquiring each customer. It shows the money spent on marketing, salaries, and related expenses to acquire a customer. For example, a company spending $500 to acquire a new customer with an expected LTV of $300 means the company is losing an estimated $200 per customer acquired.

CAC, combined with LTV is a frequently compared metric, particularly for SaaS companies. They can manage their expenses, see their growth, predict their future moves, and expand if the business allows.

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