|Overview: Customer Acquisition Cost|
|Definition||The total expenditure required to make a sale to a new customer.|
|Also Known As||CAC|
|Related Concepts||Marginal CostUnit CostCost Of Revenue|
What is Customer Acquisition Cost?
John Spacey, updated on January 04, 2017
Customer acquisition cost are the total business expenditures a company incurs to make a sale to a new customer. It is calculated using comprehensive costs such as advertising, marketing, sales commissions and the cost of retail locations. Any expenditures that are involved in convincing a new customer to buy can be included in customer acquisition cost. Customer acquisition cost is typically measured at the margin, meaning that it's calculated as the cost to add one additional customer. It is also occasionally calculated as an average for all sales in a financial period. Customer acquisition costs tend to rise with time as you acquire a larger customer base. This is the reason that it's measured at the margin, your first customer is typically cheaper to acquire than your millionth customer.
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