Customer acquisition cost (CAC) is a measure of how much a business spends on acquiring a new customer. It is calculated by dividing the total cost of sales and marketing efforts by the number of new customers acquired during a specific period of time.
CAC is an important metric for businesses to track, as it helps them understand the efficiency of their sales and marketing efforts. By knowing the CAC, a business can determine how much it is spending to acquire each new customer and whether these costs are sustainable over the long term.
To calculate CAC, a business can consider the cost of marketing efforts such as advertising, public relations, and lead generation, as well as the cost of sales efforts such as commissions and salaries for sales staff. It is important to consider all relevant costs when calculating CAC, as this will provide a more accurate picture of the true cost of acquiring new customers.
Understanding CAC can help a business optimize its sales and marketing efforts and make informed decisions about how to allocate its resources. It can also be useful for comparing the cost of acquiring new customers with the lifetime value (LTV) of those customers, to determine the overall profitability of the business.