What is Customer Acquisition Cost (CAC)?
CAC is the total expense a business incurs to acquire a new customer. This includes all costs associated with converting a prospect into a paying customer.
It is calculated using the formula:
CAC = Total Sales and Marketing Expenses/Number of New Customers Acquired
Business owners, marketers, sales teams, investors, and executives use CAC. It’s for professionals who need to evaluate and optimize customer acquisition strategies for growth and profitability.
In digital marketing, CAC is used to assess performance in marketing campaigns and sales initiatives. It is necessary when multiple digital channels, such as social media, PPC, email campaigns, and events, are used to attract customers.
CAC should be calculated regularly—monthly, quarterly, or annually—depending on business needs. Frequent calculation allows speedy adjustments to marketing strategies to improve cost efficiency and customer acquisition outcomes.
Why is CAC important?
CAC is a critical metric for measuring the efficiency and profitability of marketing and sales strategies. It helps businesses understand how much they are spending to gain each customer and whether their acquisition efforts are sustainable.
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