What is Customer Acquisition Cost (CAC)?

The customer acquisition cost (CAC) is the total amount of money that a company spends on acquiring new customers. To calculate your CAC, simply divide your total marketing and sales spend for a period of time by the number of new customers acquired during that same period. For example, if a company spent $100,000 on marketing and sales over the course of a year and acquired 100 new customers, their CAC would be $1,000. Customer acquisition costs will vary greatly from business to business and should be carefully monitored to ensure that they are in line with your overall business strategy.

There are a number of benefits to tracking your Customer Acquisition Cost (CAC). Perhaps most importantly, it can help you determine whether or not your marketing efforts are effective in acquiring new customers. By understanding your CAC, you can make more informed decisions about where to allocate your marketing budget and what kind of return on investment (ROI) you can expect from your campaigns.

Additionally, tracking CAC can also help you benchmark your performance against other companies in your industry. This can give you a good idea of how well you are doing in terms of acquiring new customers and whether or not there is room for improvement. Finally, understanding your CAC can also help you predict future customer acquisition costs, which can be helpful in planning for future marketing campaigns.

There are four main types of customer acquisition costs: paid advertising, organic marketing, referral marketing, and direct sales.

Paid Advertising: Paid advertising is when a brand pays to have their ad placed on another platform, typically through a pay-per-click (PPC) model. This can be done through search engine marketing (SEM), social media advertising, or display advertising.

Organic Marketing: Organic marketing is any form of marketing that doesn’t involve paying for placement. This includes SEO, content marketing, social media engagement, and email marketing.

Referral Marketing: Referral marketing is when a customer tells their friends about a product or service and those friends then make a purchase. This can be done through word-of-mouth, online reviews, or referral codes.

Direct Sales: Direct sales is when a company sells their product or service directly to the customer without going through a middleman. This can be done online or in person.

There is no definitive answer to this question as it will vary depending on the business, the product or service being offered, and a number of other factors. However, a good customer acquisition cost is typically considered to be below the lifetime value of the customer. This means that, over time, the revenue generated from the customer will exceed the amount spent on acquiring them. For example, if a customer is worth $1,000 to a business over their lifetime and it costs $500 to acquire them, then the customer acquisition cost is considered to be good.

The CAC ratio is calculated by dividing the total cost of acquiring new customers (CAC) by the average revenue per customer (ARPC). This ratio is a helpful way to measure how efficiently a company is spending its resources to acquire new customers and can be used to compare different companies or different periods of time for the same company. To calculate your company's CAC ratio, simply divide the total cost of acquiring new customers (CAC) by the average revenue per customer (ARPC). For example, if a company spends $100 to acquire each new customer, and the average revenue per customer is $200, then the company's CAC ratio would be 0.5.