CAC (customer acquisition cost)

Sara Heegaard March 3, 20221 minute read

Sara is a copywriter focused on lifting up Recharge's merchants, partners, and their customers. Before Recharge, her past lives included writing and editing at four different subscription... Full bio

What is CAC (customer acquisition cost)?

CAC (customer acquisition cost) measures the amount of money a company spends to earn the business of a customer. The money spent by businesses to acquire new customers typically involves marketing, advertising, and sales costs, but can also include support costs, production expenses, and more. CAC is calculated by dividing the total amount of money a business spends acquiring new customers by the number of customers acquired. 

Comparing CAC to LTV

CAC is a key business metric for both companies and their investors. However, rather than being taken at face value, CAC should always be considered in context with other metrics for a holistic sense of a company’s health. One important metric that is important to track in tandem with CAC is customer lifetime value (LTV). This is particularly crucial for subscription businesses, who have the opportunity to maintain recurring relationships with their customers over a longer period of time.