What is Customer Acquisition Cost (CAC)?

CAC results from adding all the expenses incurred in the process of converting leads into customers (marketing, sales team salaries, advertising, property, equipment, etc.) and dividing the result by the total number of customers acquired in a given period of time.

Combining CAC metrics with targeted campaigns can direct a company towards specific audiences and can indicate the actual cost of each prospective customer after conversion.

Using CAC alongside the monthly ROI and Customer Lifetime Value can successfully influence forecasting accuracy and data-driven decisions (advertising budgets, human resource investments, etc).

CAC will tell you how effective and successful your marketing and sales campaigns are. Knowing this cost will help you to manage marketing and sales resources better and focus on improving customer retention since acquiring new customers is more expensive and time-consuming.