Customer Acquisition Cost (CAC) shows how much a company pays for each new customer. It is one of the basic and most common metrics in marketing.
To calculate CAC, you have to divide all marketing and sales expenses by the number of new customers you managed to acquire over a specific period.
For example, the CAC formula for a specific marketing channel will look like this:
Advertising expenses per channel / the number of customers acquired
When you understand customer acquisition costs, your business can take advantage of the following benefits:
- assess overall marketing efficiency;
- understand which customer acquisition channels are most efficient;
- determine the optimal budget to avoid overspending;
- improve sales strategies and develop efficient ways for customer attraction and retention;
- choose and estimate the size of a potential discount for loyalty programs;
- assess how profitable advertising investments are and make an informed decision on resource allocation.
If customer acquisition costs are too high, a specific sales channel or promotion method is unsuitable for the business.
In marketing, you can calculate this metric for different channels, multiple periods, and various advertising campaigns.
Customer Acquisition Cost (CAC) is not a static metric and can change depending on various factors, including new acquisition channels, customer behavior, and market environment.
