Customer acquisition cost (CAC)
Definition
Customer acquisition cost (CAC) is the amount it costs your business to acquire a new customer. It can be calculated by dividing your total marketing expenses by the number of customers you acquired in a given period.
How is Customer acquisition cost (CAC) calculated?
The formula for calculating Customer acquisition cost (CAC) is:
Customer Acquisition Cost (CAC) = Total marketing and sales spend / The number of new customers.
Example:
The below is based on one month.
| Personal Spend | |
|---|---|
| Number of Staff | 3 |
| Staff Salary | $8,000 |
| Employee Expense | $24,000 |
| Marketing Spend | |
| PPC | $20,000 |
| Brand Advertising | $4,000 |
| Linkedin Ads | $2,000 |
| Total Marketing Expense | $26,000 |
| Total Cost | $50,000 |
| Number of New Customers | 600 |
| CAC | $83.33 |
Why is Customer acquisition cost (CAC) important to measure?
The importance of understanding your customer acquisition cost lies in knowing how much you need to spend on marketing in order to bring in new customers who will generate revenue for your company. If your CAC is too high, you may find yourself running out of funds before you have time to recoup those costs through sales revenue from new customers.
Frequently asked questions
Have another question? Reach out to our retention expert team.
- How is CAC ratio calculated?
- The CAC ratio is calculated by dividing the total cost of acquiring customers by the number of new customers acquired during a certain period.
- What is the CAC ratio in SaaS?
- This ratio measures how much it costs to acquire each new customer versus how much revenue those new customers generate for your company. The lower this number is, the better!
- What is a good CAC rate?
- CAC ratios vary widely between different types of businesses. For example, if you're in a highly competitive market where there are many other companies vying for customers, your CAC will be higher than if you offer a unique service or product.
Related terms
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