Definition: Customer acquisition costs are the funds that are used to introduce new customers to the company's products and services in hopes of acquiring the customer’s business. The customer acquisition cost (CAC) is calculated by dividing total acquisition costs by total new customers over a set period.

In Plain English: Customer acquisition cost is the average cost in marketing/acquisition methods for your company to acquire a new customer.

Example: You gained 10 new customers over a three month period and spent $3000 in marketing to those customers. Your customer acquisition cost is $3000/10=$300 per customer.

Customer acquisition cost is important to consider when determining the effectiveness of a marketing/acquisition strategy. Typically, if one strategy has a lower CAC than the other, a company will go with the more efficient strategy.