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Customer Acquisition Cost Metric measures the total expense a business incurs to acquire a new customer. It includes all marketing and sales costs divided by the number of customers gained during a specific period.
Synonyms: CAC metric, Customer acquisition expense, Cost to acquire customer, Customer acquisition cost ratio
To find the Customer Acquisition Cost (CAC), add up all costs related to marketing campaigns, sales team salaries, advertising, and any other expenses aimed at attracting customers. Then, divide this total by the number of new customers acquired in the same timeframe. For example, if a company spends $10,000 on marketing and sales in a month and gains 100 new customers, the CAC is $100.
Knowing the CAC helps businesses understand how much they are spending to grow their customer base. It allows companies to evaluate the efficiency of their marketing and sales efforts. A lower CAC means acquiring customers is more cost-effective, which can lead to higher profits.
Businesses use CAC to set budgets, forecast growth, and compare the cost-effectiveness of different marketing channels. It also helps in pricing products or services to ensure profitability. Tracking CAC over time can reveal trends and guide strategic decisions to optimize customer acquisition efforts.
