Which of the following best defines customer acquisition cost (CAC)?

Customer acquisition cost (CAC) is defined as the cost associated with acquiring a new customer. This metric encompasses all expenses that are directly attributable to gaining a new customer, including marketing and advertising costs, sales team expenses, and any other costs that contribute to the customer acquisition process. Understanding CAC is crucial for businesses because it helps evaluate the effectiveness of marketing strategies and the profitability of acquiring new customers.

In contrast, the total cost of producing a product involves costs related to manufacturing and creating a product but does not specifically relate to customer acquisition. Monthly expenses of maintaining customer relationships focus on post-sale costs and ongoing customer management rather than the initial acquisition phase. The average price of goods sold pertains to revenue generation and does not encapsulate the costs involved in obtaining new customers. Understanding CAC allows businesses to balance their marketing investments against the long-term value of the customers they acquire.