# Customer Acquisition Cost (CAC)

> Customer acquisition cost (CAC) is the total cost of acquiring a new customer, including marketing, sales, and onboarding expenses divided by the number of new customers.

- **URL**: https://dodopayments.com/glossary/customer-acquisition-cost-cac

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**What is Customer Acquisition Cost (CAC)**

Customer Acquisition Cost (CAC) is the average expense a business incurs to attract one new customer, combining all sales and marketing spend over a period, divided by the number of new customers acquired in that period

**Formula:**

Customer Acquisition Cost = Total Sales & Marketing Expenses / Number of New Customers Acquired

**Importance of Customer Acquisition Cost**

**Optimizing Marketing ROI**

By comparing CAC across channels like digital ads vs. events, the company can invest more in cost-effective tactics. If social media campaigns yield CAC $150 while events cost $400 per customer, shifting the budget improves ROI.

**Ensuring Profitability**

When CAC is significantly lower than CLV, new customers generate net profit. If CLV is $900 and CAC is $260, the ratio (CLV: CAC ~= 3.5:1) indicates sustainable growth. If CAC approaches or exceeds CLV, the model is unsustainable.

**Investor & Stakeholder Insights**

Investors often examine CAC and CLV metrics. A healthy CAC relative to CLV signals an efficient growth engine and can affect valuation or funding decisions.

**Benchmarking and Trend Analysis**

Tracking CAC over time reveals if marketing becomes more or less efficient. Rising CAC may prompt reviewing messaging, targeting, or product-market fit.