Customer Acquisition Cost (CAC) is the total expense a business incurs to acquire a new customer. This metric is crucial for understanding how much a company is spending to grow its customer base.
How to Calculate CAC: To calculate CAC, you divide the total marketing and sales expenses by the number of new customers acquired during a specific period.
CAC = (Total Sales & Marketing Costs) / (Number of New Customers Acquired)
Example:
If your sales and marketing expenses for a quarter are $50,000 and you acquired 500 new customers, your CAC would be:
CAC = $50,000 / 500 = $100
This means you spent $100 to acquire each new customer.
Understanding CAC is needed for optimising marketing strategies and ensuring sustainable business growth.
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