Business Glossary
What Is Customer Acquisition Cost?
Customer Acquisition Cost (CAC) is the total cost of acquiring one new customer — all sales and marketing spend divided by new customers acquired. It is the fundamental test of marketing efficiency and business model viability.
The Formula
CAC = Total Sales & Marketing Cost ÷ Number of New Customers Acquired
Worked Example — UK SME
A UK B2B software company: £18,000/month marketing, 24 new customers. CAC = £750. LTV = £4,200. LTV:CAC = 5.6x — strong.
UK Benchmark
📊 CAC benchmarks vary hugely by sector. B2B SaaS £300–£2,000+. Professional services £200–£1,500. E-commerce £15–£80. Local retail £5–£30. CAC only matters relative to LTV.
Common Questions
What costs should I include in CAC?
All sales and marketing costs: advertising spend, agency fees, content creation, trade shows, sales team salaries (new business proportion), CRM and marketing software.
How do I reduce CAC without reducing volume?
Focus on highest-converting channels. Improve conversion rates. Build referral programmes — referred customers typically have 30–50% lower CAC.
Is it better to have lower CAC or higher LTV?
Extending LTV usually delivers better returns. Each extra month of customer retention adds full margin at zero additional acquisition cost.
Related terms