Customer acquisition cost (CAC) – what is it?
Customer Acquisition Cost, also known as Customer Acquisition Cost (CAC), is a financial indicator that measures the total cost associated with acquiring a new customer. It is a key measure in marketing and management, as it helps companies understand how much they spend to attract new customers relative to the revenue they generate. High CAC can mean that marketing strategies need to be optimized to increase efficiency and reduce costs, thereby improving profitability.
The cost of customer acquisition is calculated by adding up all the costs associated with marketing campaigns and sales activities, and then dividing by the number of new customers acquired in a given period. These costs can include advertising expenses, sales team salaries, commissions, marketing tools and other customer acquisition activities. For example, if a company spent PLN 50,000 on advertising campaigns and other promotional activities and acquired 500 new customers as a result of these activities, the CAC is PLN 100.
CAC is not only a measure of the effectiveness of marketing activities, but also an important strategic indicator that has a direct impact on the profitability of a company. By optimizing CAC, companies can increase profitability, especially when combined with high Customer Lifetime Value (CLV). Ideally, the ratio of CLV to CAC should be as high as possible, meaning that the revenue generated by a customer significantly exceeds the cost of acquiring it.
Frequently asked questions
1. What is customer acquisition cost (CAC)?
Customer acquisition cost (CAC) is a financial indicator that describes the total cost a company incurs to acquire a new customer, taking into account all marketing and sales activities.
2. How to calculate CAC?
CAC is calculated by adding up all the costs associated with marketing and sales activities, and then dividing this sum by the number of new customers acquired in a given period. For example, if a company spent PLN 50,000 on marketing campaigns and acquired 500 customers, the CAC is PLN 100.
3. Why is CAC important for companies?
CAC is a key indicator that helps companies understand the effectiveness of their marketing and sales efforts. It allows to assess whether the costs incurred to acquire customers are proportional to the revenue they generate, which has a direct impact on the profitability of the company.
4. How can CAC be lowered?
Companies can lower CAC by optimizing advertising campaigns, increasing the efficiency of sales activities, automating marketing processes and improving conversions at each stage of the sales funnel.
