Sales Dictionary
Acquisition Cost
Definition
The total cost associated with acquiring a new customer, including marketing and sales expenses.
Deep Dive
Acquisition Cost, also frequently referred to as Customer Acquisition Cost (CAC), represents the total expense a company incurs to acquire a new customer. This metric encompasses all costs associated with convincing a potential customer to purchase a product or service, including sales and marketing expenses, salaries for marketing and sales personnel, advertising spend, promotional offers, and overheads directly attributable to customer acquisition over a specific period. It is a critical indicator of the efficiency and profitability of a company's growth strategies.
Examples & Use Cases
- 1A SaaS company calculates its total marketing and sales expenses for a quarter ($100,000) and divides it by the number of new customers acquired (100), resulting in an acquisition cost of $1,000 per customer.
- 2An e-commerce business tracks its ad spend, content creation costs, and sales team salaries for a month, then divides the total by the number of first-time buyers to determine their CAC.
- 3A startup launching a new mobile app analyzes the cost of its app store ads, influencer marketing campaigns, and PR efforts, then divides by the number of new user sign-ups to find the cost per acquisition.
Related Terms
Customer Lifetime Value (LTV)Return on Investment (ROI)Marketing SpendCustomer Acquisition Cost (CAC)