Customers and pricing
CAC (customer acquisition cost)
What it costs, on average, to win one new customer.
Last reviewedWhat does CAC (customer acquisition cost) mean?
Customer acquisition cost is total sales and marketing spending to win new customers in a period, divided by the number of new customers won. Spend 50,000 and win 1,000 customers, and CAC is 50. It only makes sense next to what a customer is worth over time (CLV).
Where does it come up in case interview prep?
- Unit economics in any businessLesson in How industries work: the toolkit
- Business models: who pays, and for whatLesson in How industries work: the toolkit
- Fixed and variable costs, operating leverage, and unit economicsLesson in Business basics for non-business learners
- Industry primers: airlines, pharma, software, energyLesson in Business basics for non-business learners
- E-commerce players, trends, and how to crack the casesLesson in E-commerce, marketplaces, and quick commerce
- Subscriber and content economicsLesson in Media, streaming, gaming, and advertising
- How education and edtech workLesson in Education and edtech
- School and edtech unit economicsLesson in Education and edtech
Related terms
- CLV (customer lifetime value)The profit a customer is expected to bring over the whole relationship.
- Unit economicsThe revenue and cost of one unit: one product, order or customer.
- TAM, SAM and SOMTotal market, the part you can serve, and the part you can win.
- Market shareOur sales as a share of total market sales.
- Relative market shareOur share divided by the largest competitor's share.
- Penetration rateThe share of potential customers who already use the product.
- Share of walletOur share of what one customer spends in the category.
- ARPU (average revenue per user)Revenue divided by the average number of users.