Customer Acquisition Cost (CAC) measures the total cost of acquiring a new customer, including all marketing and sales expenses divided by the number of new customers gained.
Calculating CAC involves summing all the costs spent on acquiring more customers (marketing expenses) and then dividing that by the number of customers acquired in the period the money was spent.
CAC = Total Costs of Acquisition / Total New Customers Acquired
CAC = Total Costs of Acquisition / Total New Customers Acquired
For instance, if a company spends $1,000 on marketing in a year and acquires 100 customers, the CAC would be $10 per customer.
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A good CAC varies by industry but generally, the lower the CAC, the better, as it indicates high efficiency in marketing spend.
A high CAC suggests that your company is spending too much to acquire each customer, which can be unsustainable in the long term.
Tailor your marketing efforts to reach a specific audience, which typically leads to higher conversion rates and lower CAC.
Investing in SEO can reduce reliance on paid advertising, lowering your CAC over time.
Streamline your sales process to improve conversion rates and reduce costs associated with customer acquisition.
