What does Customer Acquisition Cost (CAC) mean? CAC Explained
What is Customer Acquisition Cost?
Customer acquisition cost (CAC) is a financial metric that measures the cost of acquiring each new customer for a business. It is calculated by dividing the total amount spent on marketing and sales efforts to acquire new customers by the number of customers acquired during the period.
For example, if a company spends £100,000 on marketing and sales efforts to acquire 500 new customers in a year, its CAC would be £100,000 / 500 = £200.
Why does CAC matter?
CAC is an important metric for businesses, as it helps them to understand the efficiency of their customer acquisition efforts and to identify areas where they can improve. A high CAC can indicate that a company is spending too much to acquire each new customer, which may be unsustainable in the long term. On the other hand, a low CAC can indicate that a company is effectively targeting and acquiring new customers at a reasonable cost.
How is CAC used?
CAC is often used in conjunction with the lifetime value (LTV) of a customer, which is a measure of the total value that a customer is expected to generate over the course of their relationship with the business. By comparing CAC to LTV, businesses can determine whether their customer acquisition efforts are generating a positive return on investment.
Customer acquisition cost (CAC) is a financial metric that measures the cost of acquiring each new customer for a business. It is calculated by dividing the total amount spent on marketing and sales efforts to acquire new customers by the number of customers acquired during the period.
For example, if a company spends £100,000 on marketing and sales efforts to acquire 500 new customers in a year, its CAC would be £100,000 / 500 = £200.
Why does CAC matter?
CAC is an important metric for businesses, as it helps them to understand the efficiency of their customer acquisition efforts and to identify areas where they can improve. A high CAC can indicate that a company is spending too much to acquire each new customer, which may be unsustainable in the long term. On the other hand, a low CAC can indicate that a company is effectively targeting and acquiring new customers at a reasonable cost.
How is CAC used?
CAC is often used in conjunction with the lifetime value (LTV) of a customer, which is a measure of the total value that a customer is expected to generate over the course of their relationship with the business. By comparing CAC to LTV, businesses can determine whether their customer acquisition efforts are generating a positive return on investment.
