What is customer acquisition cost?

Customer acquisition cost (CAC) is the total sales and marketing spend required to win one new customer: all channel spend, salaries, and tools over a period, divided by customers acquired in it. It is half of the unit-economics equation that determines whether growth is profitable — the other half being customer lifetime value, with LTV:CAC around 3:1 the common SaaS health benchmark.

CAC is also a competitive variable: rivals bidding on the same keywords and selling to the same buyers push each other’s costs up, and the company with structurally cheaper acquisition — organic content, product-led signup, word of mouth — can outlast anyone renting attention. Rising CAC across a category is often the first measurable symptom of market saturation.