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Customer Acquisition Cost (CAC)

  • What is customer acquisition cost (CAC)
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What is customer acquisition cost (CAC)


Definition of customer acquisition cost (CAC)

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. CAC takes into account a wider range of cross-channel expenses, including more indirect activities like search engine optimization and content marketing.

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How is customer acquisition cost (CAC) measured

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.

General FAQ

How to calculate customer acquisition costs?
To calculate customer acquisition costs, companies can start by combining their total marketing and sales costs incurred across a specific period, such as six months. Take this figure and divide it by the total number of new customers acquired during that time. That’s your CAC.
What is the average customer acquisition cost in SaaS?
Customer acquisition costs can vary wildly in the SaaS industry, and many companies choose to keep their CAC close to their chest. However, research shows CAC can range from $100 to $21, which is a remarkably broad scope.
Why is it important to find out the customer acquisition cost?
Companies should aim to learn their customer acquisition cost to make sure it falls well below their customers’ Lifetime Value. Otherwise, attracting and converting buyers simply isn’t worth the expense. Another benefit of knowing your acquisition cost is that it helps you determine your Return on Investment and identify which channels lead to the lowest costs. As a result, you’ll be able to boost profit margins and keep winning new customers in a cost-effective way.

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