Customer Acquisition Cost (CAC) is a metric used to determine the total expense incurred to acquire a new customer. It encompasses all costs associated with marketing, sales, and other efforts aimed at attracting and converting potential customers into actual buyers.
To calculate CAC, you sum up all these expenses over a specific period and then divide this total by the number of new customers acquired during the same period. The formula is:
CAC=Total Cost of Acquiring Customers / Number of New Customers Acquired
Understanding CAC helps businesses evaluate the effectiveness and efficiency of their marketing and sales strategies. A lower CAC indicates a more cost-effective acquisition process, while a higher CAC may signal the need for optimization in marketing and sales efforts.
