Customer Acquisition Cost (CAC): What It Costs to Add a Customer

Customer acquisition cost (CAC) measures how much a business spends to acquire a new customer over a defined period or cohort.

A common analytical form is:

CAC = acquisition-related costs ÷ new customers acquired

If a company spends $6 million on the relevant acquisition activity and adds 30,000 customers, the resulting CAC is $200 per customer.

CAC is definition-sensitive

CAC is not a standardized GAAP measure. The numerator can include paid media, sales commissions, sales salaries, onboarding incentives, agency fees, referral payments, or only a narrower subset of those costs. The denominator can count gross new customers, activated customers, paying customers, or another issuer-defined population.

That means two companies can report different CAC figures even when their underlying economics are similar.

Reported CAC versus analyst-estimated CAC

Some issuers define and disclose CAC directly. Others disclose sales and marketing expense plus customer additions, which can tempt investors to divide one by the other.

That shortcut can be useful as an estimate, but it should not be presented as a reported metric. Sales and marketing expense may include retention, brand advertising, partner programs, or compensation unrelated to acquiring the current-period customer cohort.

CAC and accounting are different questions

The economic cost to acquire a customer is not automatically the same as the amount recognized as current-period sales and marketing expense.

Certain direct-response advertising or incremental contract-acquisition costs can have specific accounting treatment, while many acquisition expenditures are expensed as incurred. A company-specific CAC metric therefore needs its own definition rather than being inferred from one financial-statement line.

Connect CAC to customer value

CAC becomes more informative when compared with the gross profit or contribution expected from the acquired cohort. That is the logic behind Customer Lifetime Value and the LTV/CAC Ratio.

A low CAC is not automatically attractive if the customers churn quickly, require heavy servicing costs, or generate little gross profit. A higher CAC can still produce strong economics when retention and customer value are high.

Investor interpretation

Check the numerator, denominator, customer cohort, acquisition channel, measurement period, and whether the figure is reported or reconstructed. Also ask whether CAC is rising because marketing is becoming less efficient or because the company is deliberately moving into more expensive but higher-value customer segments.

Sources

• Spark Energy 2025 Form 10-K, customer acquisition cost disclosures
• Getty Images 2025 Form 10-K, customer acquisition cost and lifetime-value discussion

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