Enter the cost of sales, cost of marketing, and the number of customers acquired to determine the customer acquisition cost.
Customer Acquisition Cost Formula
The following formula is used to calculate a customer acquisition cost.
CAC = ( CoS + CoM ) / NC
- Where CAC is the customer acquisition cost ($/customer)
- CoS is the cost of sales ($)
- CoM is the cost of marketing ($)
- NC is the number of new customers
Customer Acquisition Cost Definition
A customer acquisition cost, or CAC for short, is a measure of the total cost it takes to acquire 1 customer on average.
Why is customer acquisition cost important?
A customer acquisition cost is a key metric in business and marketing analysis. Customer acquisition costs measure the total cost it takes to acquire a customer. Reducing this cost leads to a more profitable business. A highly profitable business has either a very low cost of sales or a low marketing cost per customer. A business with a low marketing cost has an efficient process for acquiring customers, and a company with a low cost of sales has a high margin on its product.
What does customer acquisition cost consist of?
The most common equation for customer acquisition cost consists of the cost of marketing and the cost of sales per customer acquired. Sometimes marketing teams will exclude the cost of sales in their analysis because they are only concerned about the efficiency of their marketing strategy.
How to decrease a customer acquisition cost?
Analyzing the formula above, the two ways to decrease customer acquisition cost is to decrease either the cost of sales and cost of marketing or both, per customer acquired. Decreasing the cost of sales involves decreasing the cost to produce a good or service. Reducing the cost of marketing can include decreasing the cost per lead through a change in marketing strategy.
Customer Acquisition Cost Example
How to calculate customer acquisition cost?
- First, determine the cost of sales.
This would be anything that goes into selling a good or service.
- Next, determine the cost of marketing.
Measure the total cost of marketing that is targeted specifically at this specific product.
- Nest, determine the number of new customer.
Measure the number of new customers during the time period being analyzed.
- Finally, calculate the CAC.
Using the formula presented above, calculate the customer acquisition cost.
A customer acquisition cost, or CAC for short, is a measure of the total monetary cost of acquiring one customer. In general, this CAC is balanced with the lifetime value of the customer to determine if a product is profitable and worth pursuing