Understanding Customer Acquisition Cost (CAC): A Simple Guide

Learn what Customer Acquisition Cost (CAC) is and how to calculate it effectively in this concise guide.

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Customer Acquisition Cost (CAC) is the total sales and marketing cost required to earn a new customer. Calculate it using the formula: CAC = (Total Sales and Marketing Expenses) / (Number of New Customers Acquired). For example, if you spent $10,000 to acquire 100 customers, your CAC is $100.

FAQs & Answers

  1. What does Customer Acquisition Cost mean? Customer Acquisition Cost (CAC) is the total cost of sales and marketing incurred to acquire a new customer.
  2. How do I calculate my CAC? To calculate CAC, divide your total sales and marketing expenses by the number of new customers acquired in a specific period.
  3. Why is understanding CAC important? Understanding CAC is vital for evaluating the effectiveness of marketing strategies and ensuring long-term business profitability.
  4. What is a good CAC ratio? A good CAC ratio can vary by industry, but a common benchmark is to aim for a CAC that is less than one-third of the customer’s lifetime value (LTV).