Customer Acquisition Cost (CAC) is how much it costs a business to gain a new customer. It includes all spending on marketing, sales, advertising, and any other costs directly linked to getting that customer to buy.
Understanding CAC helps businesses see how efficient their marketing is and whether they’re spending too much to grow.
How to Calculate CAC
The basic formula is:
CAC = Total Marketing & Sales Spend ÷ Number of New Customers
Example:
If a company spends £5,000 on marketing in a month and gets 100 new customers, the CAC is £50.
What’s Included in CAC?
- Paid ads (e.g. Google Ads, Meta Ads)
- Sales team salaries and commissions
- Marketing software/tools
- Creative production (e.g. videos, graphics)
- Discounts or offers used to convert leads
Why CAC Matters
- Profitability: If CAC is higher than the profit from a customer, the business loses money.
- Planning: Helps set budgets and measure growth.
- Investor Insight: CAC is a key metric for showing how scalable a business is.
Ways to Improve CAC
- Focus on high-performing channels
- Optimise landing pages and conversion paths
- Use retargeting to lower ad spend waste
- Improve lead qualification so sales teams spend time on the right prospects
- Strengthen word-of-mouth and referral marketing