Customer Acquisition Cost (CAC)

What is Customer Aquisition Cost?

Customer Acquisition Cost (CAC) is the best approximation of the total cost of acquiring a new customer in your business. Hence it should include costs like advertising costs, the costs of your salespeople, the salary of your marketers, etc., divided by the number of customers acquired.

How to Calculate CAC?

The CAC metric is important to two parties: companies (organizations) and investors. For example, if an organization spent $200 on marketing in a year and acquired 200 customers in the same year, their CAC is $1.00.

Picture 1. CAC calculation

How To Improve Your CAC?

There are a couple of methods to improve the CAC of your business:

Implement customer relationship management (CRM). It’s one of the best contemporary marketing strategies to please their customer needs. CRM is about prioritizing who we already have a connection with, rather than looking at new leads.

Enhance user value. It’s the ability to generate something pleasing to the users. So, focus on the proper users, define your target, and create a buyer persona that matches your target.

Boost your on-site conversion metrics. It’s the percentage of users who take the desired action. There are many ways to increase your conversation rate.

Define your Unique Selling Proposition (USP). It’s the single factor or a reason why a product or service is different than competitions’. For example, when FedEx first offered overnight delivery, their USP was, “When it absolutely, positively has to be there overnight.”