Customer Acquisition Cost (CAC) is a metric used by businesses to determine the cost of acquiring a new customer. It is the total cost of sales and marketing efforts divided by the number of new customers acquired during a specific period.
CAC is an important metric for businesses because it helps them understand how much they are spending to acquire new customers. By knowing the cost of acquiring a customer, businesses can determine if their sales and marketing efforts are effective and if they are generating a positive return on investment (ROI).
The formula for calculating CAC is:
CAC = Total Sales and Marketing Costs / Number of New Customers Acquired
For example, if a business spends $10,000 on sales and marketing efforts and acquires 100 new customers, the CAC would be $100.
Reducing CAC can be a challenge for businesses, but there are several strategies that can be implemented to lower the cost of acquiring new customers:
Customer Acquisition Cost (CAC) is an important metric for businesses to understand as it helps them determine the cost of acquiring new customers. By calculating CAC and implementing strategies to reduce it, businesses can improve their ROI and increase profitability.