What is customer acquisition cost
The customer acquisition cost (CAC) of a company or business is the total sales and marketing cost of acquiring a new customer over a specific time period.
This total cost includes all program and marketing expenses, salaries, commissions, bonuses and overhead related to the process of attracting new leads and converting them into customers.
In short, it describes how much a company has to spend to acquire a new customer, and the company always tries to keep the cost as low as possible. Any action must be quantified, from the cost of a click on a banner to the payment for the publication of a commercial article.
What is the purpose of knowing the CAC
This index is an important piece of information, which makes it possible:
The customer acquisition cost (CAC) of a company or business is the total sales and marketing cost of acquiring a new customer over a specific time period.
This total cost includes all program and marketing expenses, salaries, commissions, bonuses and overhead related to the process of attracting new leads and converting them into customers.
In short, it describes how much a company has to spend to acquire a new customer, and the company always tries to keep the cost as low as possible. Any action must be quantified, from the cost of a click on a banner to the payment for the publication of a commercial article.
What is the purpose of knowing the CAC
This index is an important piece of information, which makes it possible:
- Analyze conversion strategies, their effectiveness and execution.
- Make decisions on where to concentrate and spend more resources.
- Evaluate the return on investment.
- Optimize business model strategies.
CAC is an indicator of the success of marketing actions and the performance of sales campaigns. Customer acquisition cost is an important key performance metric that your company should monitor to determine the effectiveness of your campaigns.
How to calculate it
How to calculate it
- Determine the period to be evaluated (month, quarter or year).
- Consider the total marketing and sales spend.
- Divide this expense by the number of new customers obtained in that period.
CAC = Cost of marketing and sales / Number of customers acquired.
The numerator includes everything from investment in advertising, to technical costs, salaries, software and others.
How to improve CAC
As we have indicated above, it is in the company's interest to reduce the cost of customer acquisition. To do this, you should:
Boost the lead conversion rate:
With Google Analytics, you can obtain data and statistics on how often customers abandon their shopping carts after adding an item. It is also important to check the loading speed of web pages and achieve attractive designs. In short, delivering the best customer experience is the big goal.
Add value to your offer:
The value users perceive from products and services is subjective. That is why it is key to know exactly what adds value to the company's customers, from customer service to emails.
Use a CRM system:
A CRM platform can track new customers, their movements through the marketing funnel, how much they buy, when and where, the level of loyalty, and so on. In addition, they also manage mailing lists and promotional and advertising campaigns.
Having the best information to make the best decisions:
Really knowing the customers/potential customers of the business and having the right information at the right time when you need it, something OmniData Marketing provides you with, will save time and allow you to improve conversions.
Relationship to customer lifetime value
A term related to customer acquisition cost (CAC) is customer lifetime value (CLV) and refers to the amount a company gets from each customer over the "lifetime" of the customer making a purchase.
How long a person remains a customer and how much they spend varies widely and is driven by a number of factors. These are:
The numerator includes everything from investment in advertising, to technical costs, salaries, software and others.
How to improve CAC
As we have indicated above, it is in the company's interest to reduce the cost of customer acquisition. To do this, you should:
Boost the lead conversion rate:
With Google Analytics, you can obtain data and statistics on how often customers abandon their shopping carts after adding an item. It is also important to check the loading speed of web pages and achieve attractive designs. In short, delivering the best customer experience is the big goal.
Add value to your offer:
The value users perceive from products and services is subjective. That is why it is key to know exactly what adds value to the company's customers, from customer service to emails.
Use a CRM system:
A CRM platform can track new customers, their movements through the marketing funnel, how much they buy, when and where, the level of loyalty, and so on. In addition, they also manage mailing lists and promotional and advertising campaigns.
Having the best information to make the best decisions:
Really knowing the customers/potential customers of the business and having the right information at the right time when you need it, something OmniData Marketing provides you with, will save time and allow you to improve conversions.
Relationship to customer lifetime value
A term related to customer acquisition cost (CAC) is customer lifetime value (CLV) and refers to the amount a company gets from each customer over the "lifetime" of the customer making a purchase.
How long a person remains a customer and how much they spend varies widely and is driven by a number of factors. These are:
- Average customer lifetime: the length of time the individual/company remains a customer.
- Customer retention rate: the percentage of repeat customers.
- Profit margin per customer: can take into account CAC as well as other structural business expenses. It is calculated by dividing net revenue per customer by the customer's lifetime revenue with you.
- Average amount spent during the customer's lifetime as a customer. This is calculated by adding up what each customer spends over their lifetime and dividing by the number of customers.
- Average gross margin per customer: this can be calculated for a given period of time and relates the profit margin per customer over their lifetime to what they spend over their lifetime.