What is Customer Acquisition Cost (CAC)?
Customer acquisition cost is the total cost of sales and marketing efforts divided by the number of new customers acquired in a given period. If you spend $1,000 on marketing in a month and gain 20 customers, your CAC is $50.
A complete CAC includes everything spent to win customers: ad budget, software, content production, and the cost of any time or people dedicated to acquisition. Leaving costs out produces a flattering but useless number.
CAC only means something in context. It is judged against lifetime value (LTV) — how much a customer is worth over time. A healthy business earns back its CAC well within the customer's lifespan, ideally with an LTV at least three times the CAC.
Why it matters
If you spend more to acquire a customer than they are worth, you lose money on every sale — and growth makes the problem worse, not better. CAC is the metric that tells you whether your growth is profitable or a slow-motion bankruptcy.
Knowing CAC per channel also tells you where to invest. A channel with low CAC and high-quality customers deserves more budget; a channel with high CAC deserves scrutiny or the cut.
How Distro helps
Distro's growth report and channel recommendations steer you toward acquisition channels with favorable economics for your business, so your effort goes where CAC stays low. Get your free growth report to see your best channels.
Related terms
Lifetime Value (LTV)
Lifetime value is the total revenue a business expects to earn from a single customer over the entire duration of their relationship.
Conversion Rate
Conversion rate is the percentage of visitors or leads who complete a desired action such as signing up, purchasing, or subscribing.
Monthly Recurring Revenue (MRR)
Monthly recurring revenue is the predictable total revenue a subscription business earns each month from all active subscribers.