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Glossary
Product concepts

What is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost (CAC) is the total investment required to convince a potential customer to purchase a product or service, encompassing all marketing and sales expenses. It is calculated by dividing the total cost of acquisition efforts by the number of new customers acquired during a specific time period.

When to use it

Teams use CAC to evaluate the efficiency of their marketing channels and determine if their business model is sustainable. It is essential when performing unit economic analysis, especially when compared against Customer Lifetime Value (LTV) to ensure the cost of winning a customer doesn't exceed the revenue they generate.

Example

A SaaS team prioritizing 4 features for Q3 spends $10,000 on digital advertising and $15,000 on sales salaries during the quarter. If these efforts result in 125 new customers, the CAC is $200 per customer ($25,000 total spend divided by 125 customers). By comparing this $200 cost to the average customer's lifetime value, the team can decide whether to scale up their current marketing spend or focus on product features that reduce friction in the sales funnel.

How Planet Roadmap helps with Customer Acquisition Cost (CAC)

Planet Roadmap has an OKR tree feature that lets you track CAC as a key result for growth-focused objectives. This allows you to see how product updates and feature releases correlate with changes in acquisition efficiency.

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FAQ

What is the difference between 'blended' and 'paid' CAC?
Paid CAC only includes marketing spend and customers acquired from paid channels like search ads or social media. Blended CAC includes all marketing expenses and all new customers, including those who found the product through organic search, word-of-mouth, or referrals.
How does CAC relate to the LTV/CAC ratio?
The LTV/CAC ratio compares the lifetime value of a customer to the cost of acquiring them; a ratio of 3:1 is generally considered the benchmark for a healthy, sustainable SaaS business.

Related terms

Customer Lifetime Value (LTV)KPIProduct-Market FitChurnOKRCohort Analysis

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