The total sales and marketing cost to acquire one new customer — a measure of growth efficiency and the sustainability of the business model.
Deeper Explanation
CAC measures how efficiently a business converts marketing expenditure into customers. A rising CAC signals that the easiest customers have already been acquired and the business must work harder (and spend more) for each new one — a warning sign about future growth economics. A falling CAC suggests brand, word-of-mouth, or product virality is doing the acquisition work. CAC must always be read alongside LTV (Lifetime Value): a high CAC is fine if LTV is even higher. The LTV/CAC ratio is the growth investor's measure of whether the unit economics of customer acquisition justify the investment.
Continue Learning
Go deeper into the Growth school — frameworks, case studies, and decision systems.