How to Calculate the Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the cost of acquiring a customer to purchase products. It works along with the Customer Lifetime Value (CLV). CAC is an important term for growth businesses.

If a company knows the cost of bringing a customer on, it can get a clear vision of its capital requirements in reaching a specific level of growth. It is the total spend on digital marketing and other direct costs which the company has deployed to attract customers.

It is a simple measure that can tell us a lot about the performance and return of investment. Once you have some parameters between which the company oscillates on a regular basis, it is easy to interpret. If the CAC is increasing, then it means that you are getting worse results flowing from the marketing efforts. It may be that a specific campaign does not resonate with the target audience or maybe it is becoming increasingly competitive to position the company through specific digital channels. It may be time to consider alternative channels, maybe a different messaging campaign.

What if the CAC is decreasing?

It might be a temporary advantage, a great campaign or a message that really draws the customer to your website, to your product.

In time such efficiencies tend to disappear, due to competitive pressures and of new similar products in the marketplace.

How to measure your CAC?