Customer acquisition cost (CAC)

What is the customer acquisition cost?

Customer Acquisition Cost (CAC) is the total amount of money a business spends to acquire a new customer. It includes marketing, advertising, sales team salaries, software tools, and any other costs tied directly to attracting and converting leads into paying customers.

The customer acquisition cost centers on efficiency. CAC tells you how much you’re spending to get each new customer, and whether that investment is sustainable compared to the revenue that customer brings in.

Why is customer acquisition cost important?

Knowing your CAC helps you make better decisions about budgeting, campaign strategy, and pricing. If your CAC is higher than your customer’s lifetime value (LTV), you’re losing money. A healthy balance between CAC and LTV means your business can grow profitably.

How can you improve CAC?

• Optimize your ad spend and targeting
• Improve website conversion rates
• Use referral and loyalty programs
• Nurture leads more efficiently
• Focus on retaining customers longer to increase LTV

How to calculate customer acquisition cost?

Use this simple formula:

CAC = Total Sales & Marketing Costs ÷ Number of New Customers Acquired

Example:
If you spent $5,000 on marketing in a month and acquired 100 new customers, your CAC is $50.

Driftcharge Tip

Keep an eye on both CAC and LTV, improving one without the other won’t lead to sustainable growth. The goal is to acquire customers affordably and retain them for the long haul.

Ganesh Pawar

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Ganesh Pawar is the founder of Driftcharge, a subscription management app designed to help Shopify merchants streamline and scale their subscription businesses. With a deep focus on solving real-world pain points—like legacy account page support, flexible subscription options, and advanced analytics—Ganesh is passionate about building tools that drive growth and retention.