What is Customer Acquisition Cost (CAC)?
Customer acquisition cost (CAC) is the amount of money a company spends to acquire a new customer. It helps measure the return on investment of work to grow clientele. CAC is calculated by adding the costs associated with converting prospects into customers (marketing, advertising, sales personnel, and more) and dividing that amount by the number of customers acquired.
Example
For example, if a company spends $10,000 on marketing and sales efforts in a month and acquires 100 new customers during that period, the CAC would be calculated as follows:
CAC = Total Cost of Acquisition / Number of New Customers
CAC = $10,000 / 100
CAC = $100 per new customer
So, the Customer Acquisition Cost for this company is $100 per new customer. This means that, on average, the company spends $100 to acquire each new customer.