Customer Acquisition Cost measures the total cost to acquire one new customer. Learn how CAC relates to LTV and where it sits in a KPI tree.
Customer Acquisition Cost (CAC) is the total sales and marketing spend divided by the number of new customers acquired in a period. In a KPI tree, CAC appears as a cost-side driver: Profit = Revenue - Costs, where Costs include CAC × New Customers. The CAC-to-LTV ratio is a key health indicator: a ratio above 3:1 generally indicates a sustainable business model.