Question
CAC stands for Customer Acquisition Cost. It's a key business metric that represents the cost of acquiring a new customer. In other words, it's the total cost of sales and marketing efforts that are needed to attract a customer, divided by the number of customers acquired in the period the money was spent.
CAC is used in many business models, especially in those where the customer lifetime value (CLV or LTV) is significantly higher than the cost of acquisition. It's a particularly important metric in the SaaS (Software as a Service) industry, e-commerce, and any other business that relies on customer subscriptions or repeat business.
The lower the CAC, the better for the business, as it means that the company is spending less money to acquire new customers. However, it's also important to consider the balance between CAC and LTV, as spending too little on customer acquisition could result in lower overall revenue if potential customers are not reached or converted.
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