CAC

Cost of Acquiring Customer

CAC stands for Customer Acquisition Cost. It is a metric used by businesses to determine the total average cost spent to acquire a new customer. This includes all sales and marketing expenses over a specific period divided by the number of customers acquired in that same period.

CAC Formula

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The breakdown for each variable is as follows:

• CAC (Customer Acquisition Cost): The cost associated with convincing a potential customer to buy a product or service, averaged over all customers acquired.
• Total Sales and Marketing Expenses: All the costs related to marketing and sales efforts within a specific period. This includes advertising costs, sales and marketing team salaries, and tools.
• Number of New Customers Acquired: The total number of new customers who have purchased due to these marketing and sales efforts within the same period.

By using this equation, businesses can assess the efficiency of their marketing strategies and ensure that they are not spending excessively on acquiring new customers relative to the revenue those customers generate.