CAC (Customer Acquisition Cost)

Customer Acquisition Cost is a metric representing the total cost of acquiring a new customer, calculated by dividing all marketing, sales, and advertising expenses by the number of new customers gained in a given period. If a company spends $50,000 on marketing in a month and acquires 500 new customers, the CAC is $100 per customer.

CAC becomes meaningful when compared against Customer Lifetime Value. A healthy business typically has an LTV to CAC ratio of at least 3:1, meaning each customer generates at least three times what it cost to acquire them. If CAC exceeds LTV, the business loses money on every customer, which is unsustainable regardless of growth rate. This ratio is one of the most scrutinized metrics by investors evaluating SaaS and e-commerce businesses.

For web development, CAC is relevant because technical decisions directly affect it. Page load speed impacts conversion rates on landing pages, which directly raises or lowers CAC. Conversion rate optimization through A/B testing of signup flows and checkout processes is fundamentally about reducing CAC. Analytics implementation determines whether a team can accurately attribute customers to specific channels.