Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer. It includes all marketing and sales expenses associated with attracting and converting prospects into paying customers.
CAC is an important metric because it helps businesses evaluate the efficiency of their marketing and sales efforts and provides insights into the return on investment (ROI) for customer acquisition strategies.
How do you calculate CAC?
To calculate CAC, you can follow this formula:
CAC = (Total Marketing and Sales Expenses) / (Number of New Customers Acquired)
For example, if a company spent $5,000 on marketing and sales efforts in a given period and acquired 50 new customers during that time, the CAC would be:
CAC = ($5,000) / (50 customers) = $100 per customer
By tracking CAC, businesses can determine if their customer acquisition strategies are cost-effective, make informed decisions about marketing and sales budgets, and identify areas for improvement or optimization.
In general, a lower CAC indicates a more efficient customer acquisition process, while a higher CAC may signal the need for adjustments to marketing and sales strategies.