Customer Acquisition Cost.

Customer Acquisition Cost (CAC) is the average amount spent to acquire a single new customer, calculated as total marketing and sales spend (including salaries, ad spend, tools, agency fees, and content production) divided by the number of new customers acquired in the same period. CAC is the primary metric for evaluating the efficiency of marketing investment.

CAC by Channel

CAC varies dramatically by acquisition channel. Organic search typically produces the lowest CAC of any digital channel because, once established, it generates traffic without incremental cost—lowering blended CAC significantly. Paid search and social advertising have higher but predictable CAC that scales with budget. Understanding channel-level CAC helps allocate budget to the highest-efficiency channels and set realistic targets for new channel investments.

The LTV:CAC Ratio

The LTV:CAC ratio is the definitive health metric for marketing efficiency: it compares the value a customer brings against the cost to acquire them. A ratio above 3:1 is considered healthy for most SaaS businesses; below 1:1 means you're losing money on every customer. Improving this ratio requires either increasing LTV (better retention, upsells, pricing) or decreasing CAC (more efficient channels, conversion rate optimisation, improved organic traffic).