Sales, Marketing
Customer Acquisition Cost (CAC)
CAC is the total cost of acquiring a new customer, encompassing all marketing and sales expenses over a given period. This metric is essential for evaluating the effectiveness of marketing strategies and determining the investment required to attract each new customer.
HOW TO MEASURE
CAC is calculated by dividing all costs spent on acquiring more customers (marketing expenses, sales team salaries, advertising costs, etc.) by the number of customers acquired in the period the money was spent.
HOW TO IMPROVE
Optimize Marketing Channels: Identify and focus on the most cost-effective marketing channels.
Enhance Conversion Rates: Improve website and campaign conversion rates through A/B testing and user experience improvements.
Automate Sales Processes: Implement automation tools to reduce labor costs and increase efficiency.
Refine Targeting: Use data analytics to target high-value prospects likely to convert.
FORMULA
CAC = Total Marketing and Sales Expenses / Number of New Customers Acquired
EXAMPLE
A software company spends $100,000 on marketing and sales over a quarter and acquires 500 new customers. The CAC would be: 𝐶𝐴𝐶=100,000/500=$200. This means it costs the company $200 to acquire each new customer.
DEPARTMENT USAGE
Leadership: For budgeting and financial forecasting.
Marketing: To evaluate and plan marketing campaigns based on cost-efficiency.
Sales: To assess the effectiveness of sales strategies and operational costs.
Finance: For expense management and profitability analysis.
View the collection of Metrics Workshops.