Customer acquisition cost (CAC) is a metric used to convey the monetary cost of convincing a new customer to use your product or service.
Thanks to digital technology, it’s never been easier to track prospective leads in your sales funnel. In fact, it’s now possible to track your customers all the way from the first contact to check-out.
This advanced tracking has led to the development of metrics like customer acquisition cost.
CAC is a metric that is often overlooked in favor of more direct advertising costs (like cost per click), but it’s actually a far more holistic approach to cost-tracking. Customer acquisition cost takes into account a wider range of cross-channel expenses, including more indirect activities like search engine optimization and content marketing.
Discovering your customer acquisition cost is actually a very simple calculation.
In a nutshell, you need to take a set period of time — 90 days, for example — then add up the total costs of all your marketing and sales activities. Don’t leave anything out. Inaccurate numbers at this point can negatively impact your decision-making going forward.
Once you have the total cost of sales and marketing, you simply divide this total cost by the total number of customers you acquired over that same period of time.
Of course, the lower your CAC the better. Using software to automate your marketing efforts can help reduce CAC, as it cuts down on the costly man-hours required to win new business.