Recovering customer acquisition cost (RCAC)
Definition
Acquiring new customers is essential for businesses to grow, but it can also be one of the most costly investments a company makes. In order to ensure that acquisition costs are covered and that acquisition efforts are profitable, businesses need to track and calculate their Recovering customer acquisition cost, or RCAC.
Recovering Customer Acquisition Cost (RCAC) is a metric used by subscription businesses to calculate how long it will take them to recover the Customer Acquisition Cost (CAC). RCAC is normally measured in months but can be measured in years depending on contract length. One use for RCAC is the ability to work out what level of marketing budget you can use to ensure profitability going forwards.
By understanding how much it costs to acquire new customers, businesses can set budgets and targets, and track their progress over time. Additionally, RCAC can be used to compare the cost of acquisition across different channels or marketing campaigns.
How is Recovering customer acquisition cost (RCAC) calculated?
There are a number of different ways to calculate RCAC, but the most common and most accurate method is to divide the total cost of acquisition by the combination of Customer lifetime value over Customer lifetime, during a specified time period. This will give you your RCAC number.xt
The formula for calculating Recovering customer acquisition cost (RCAC) is:
RCAC = Customer Acquisition Cost (CAC)/ [(Customer Lifetime Value (CLTV) ÷ Customer Lifetime (Measured in Months)]
Example:
Let’s say your CAC is $9000, and your CLTV is $21,000 and your Average customer lifetime is 10 months.
$21,000/10 = $2100.
$9,000/$2,1000 = 4.28
Recovering Customer Acquisition Cost (RCAC)= 4.28 Months.
Why is Recovering customer acquisition cost (RCAC) important to measure?
RCAC is important because it allows businesses to track and optimise their acquisition efforts. By understanding how much it costs to acquire new customers, businesses can make informed decisions about where to allocate their resources. Additionally, RCAC can help businesses identify acquisition opportunities and track their progress over time.
What is Customer acquisition cost?
Customer acquisition cost, or CAC, is the cost of acquiring new customers. This can include the cost of marketing, advertising, sales, and other efforts to attract and convert new customers.
What is the difference between CAC and RCAC?
Customer acquisition cost, or CAC, is the cost of acquiring new customers. Recover customer acquisition cost, or RCAC, is the cost of acquiring new customers minus the cost of lost customers.
How can I reduce my customer acquisition costs?
There are a number of ways to reduce customer acquisition costs, including optimising your marketing and sales efforts, improving your conversion rates, and reducing customer churn.
