To calculate the Customer Acquisition Cost (CAC):
\[ CAC = \frac{CoS + CoM}{NC} \]
Where:
A customer acquisition cost, or CAC for short, is a measure of the total cost it takes to acquire 1 customer on average.
Why is customer acquisition cost important? A customer acquisition cost is a key metric in business and marketing analysis. Customer acquisition costs measure the total cost it takes to acquire a customer. Reducing this cost leads to a more profitable business. A highly profitable business has either a very low cost of sales or a low marketing cost per customer. A business with a low marketing cost has an efficient process for acquiring customers, and a company with a low cost of sales has a high margin on its product.
What does customer acquisition cost consist of? The most common equation for customer acquisition cost consists of the cost of marketing and the cost of sales per customer acquired. Sometimes marketing teams will exclude the cost of sales in their analysis because they are only concerned about the efficiency of their marketing strategy.
Let's assume the following values:
Step 1: Sum the cost of sales and marketing:
\[ CoS + CoM = 5000 + 3000 = 8000 \]
Step 2: Divide the total cost by the number of new customers:
\[ CAC = \frac{8000}{200} = 40 \]
The Customer Acquisition Cost is $40 per customer.