CAC (Customer Acquisition Cost)

Customer Acquisition Cost (CAC) is a key business metric that measures how much money a company spends to acquire each new customer. To calculate CAC, add up all the marketing and sales expenses (like advertising, salaries, and campaign costs) over a specific period and then divide that total by the number of new customers gained during that same period. Broadly, CAC tells a business how much it costs on average to convince someone to become a paying customer. Lower CAC is generally better because it means a company is acquiring customers more efficiently. High CAC can eat into profits and make it harder to grow profitably. By understanding CAC, businesses can make informed decisions about their marketing strategies, allocate resources more effectively, and work on improving the overall cost-effectiveness of their customer acquisition efforts.