Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) measures the total expense a company incurs to acquire a new customer. It offers insight into the efficiency and ROI of marketing and sales efforts.

Common costs included:

- Marketing and advertising (salaries, campaigns, tools)

- Sales (staff salaries, lead generation, travel, prospect gifts)

How to calculate CAC:

1. Select a time period for evaluation.

2. Sum all marketing and sales expenses during that period.

3. Divide the total cost by the number of new customers acquired.

Formula:

CAC = (Total Sales and Marketing Expenses) ÷ (Number of New Customers)

Example:

If a company spends $25,000 on sales and marketing in a quarter and gains 2,000 customers,

CAC = $25,000 ÷ 2,000 = $12.50 per customer.

Tracking CAC helps businesses optimize spending and improve customer acquisition strategies.