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CAC (Customer Acquisition Cost) - Definition, Formula, and Importance

What is CAC (Customer Acquisition Cost)?

Customer Acquisition Cost (CAC) measures the total expense required to attract and convert a new customer, including marketing, sales, and related costs. It’s calculated by dividing total acquisition expenses by the number of new customers gained during a specific period. This metric helps businesses evaluate marketing efficiency and return on investment in customer growth strategies.

What Goes Into It?

Marketing Costs

  • Advertising spend
  • Content creation
  • Social media campaigns
  • Email marketing

Sales Expenses

  • Sales team salaries
  • Commission payments
  • CRM software
  • Sales tools and training

The Math

CAC = Total Acquisition Costs ÷ New Customers

Example: Spent $10,000 on marketing/sales, got 100 new customers CAC = $10,000 ÷ 100 = $100 per customer

Why It Matters?

Shows if marketing is efficient
Helps price products right
Indicates business health
Guides growth decisions

Making It Better

Smart Targeting

Focus on audiences most likely to convert. Don’t waste money on wrong prospects.

Better Conversion

Improve your sales funnel. Make it easier for interested people to become customers.

Use Technology

Automate where possible. Track what works. Cut what doesn’t.

Common Issues

  • Hard to track all costs accurately
  • Long sales cycles complicate measurement
  • Multiple touchpoints make attribution tricky

Industry Differences

B2B usually has higher CAC than B2C
  • B2B: Longer sales cycle, more touchpoints
  • B2C: Faster decisions, lower touch
Remember: Good CAC varies by industry. Focus on trends and improvement rather than absolute numbers.
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