CAC - Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the total cost associated with acquiring a new customer. This includes all marketing and sales expenses, such as advertising, promotions, salaries, and commissions. CAC is a vital metric for understanding the efficiency of a company’s sales and marketing efforts. A lower CAC indicates more efficient customer acquisition.

How to Calculate CAC: 

CAC is calculated by dividing the total costs of sales and marketing by the number of new customers acquired during a specific period.
Formula:  
CAC Image

Examples:  

1. Basic Example: A company spends $50,000 on sales and marketing in a month and acquires 100 new customers. The CAC is:
\[CAC = \frac{50,000}{100} = 500 \text{ USD}\]
2. Comprehensive Example: Over a quarter, a company spends $150,000 on sales and marketing (including salaries, advertising, and promotional events) and acquires 300 new customers. The CAC is:
\[CAC = \frac{150,000}{300} = 500 \text{ USD}\]

Key Considerations:

  • Include All Costs: Ensure all relevant costs, including salaries, software, and overheads, are included in the total sales and marketing expenses.
  • Time Period Alignment: Make sure the time period for the costs and the number of customers acquired is the same when calculating CAC.