CAC refers to the Customer Acquisition Cost or Cost to acquire customers. This is an important measurement that illustrates the cost/amount spent by an organization to acquire a new customer.
There are numerous ways to calculate CAC. The most common way is to divide the total marketing campaign costs by the number of new customers acquired within a the campaigning time period.
The total marketing campaign cost can be broken down into many things, such as cost of sales, property or equipment, or price paid to convince a customer to buy a product or service. Customers acquired is measured through how many people actually purchased the product or service given the campaign.
CAC=MCC/CA ---> Customer Acquisition Cost= Marketing Campaign Costs divided by Customers acquired.
It's important to measure this metric often in order to best see if your campaign is working, and if not what changes can be made to make it better. Creating campaigns that are engaging will keep consumers coming back and will keep your CAC low.
How do you calculate CAC?
To calculate CAC, divide the total costs associated with acquiring customers (such as advertising, sales and marketing expenses) by the number of customers acquired during that period.
What are some examples of costs associated with customer acquisition?
Examples of costs associated with customer acquisition include advertising expenses, sales and marketing salaries, website hosting fees, lead generation software costs, etc.
Fun Fact:
According to a study by Bain & Company, the average Customer Acquisition Cost (CAC) for businesses is $1.33 per customer acquired (Mazza, 2019).