Customer Acquisition Cost (CAC) is the amount of money a business spends to acquire a new customer. It includes all costs associated with acquiring new customers, such as marketing and advertising expenses, sales commissions, and overhead costs.
An example of CAC might be a business that spends $10,000 on a marketing campaign that results in 100 new customers. The CAC for this campaign would be $100 per customer ($10,000 divided by 100 customers).
Measuring CAC involves tracking all costs associated with acquiring new customers and dividing that total by the number of new customers acquired. This calculation can be done for specific marketing campaigns, sales channels, or over a longer period of time. In addition to calculating CAC, businesses may also track metrics such as customer lifetime value (CLV) to determine whether the cost of acquiring new customers is sustainable over the long term.
CAC is an important metric for businesses to track because it helps them understand the cost-effectiveness of their marketing and sales efforts. By tracking CAC, businesses can identify which marketing and sales channels are the most effective at acquiring new customers and optimize their efforts accordingly. Additionally, tracking CAC can help businesses identify areas where costs can be reduced or efficiency can be improved, ultimately leading to increased profitability and growth.