Growth Virality

Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the metric that every business should have. It is widely used by investors and companies to track consumers and highly targeted campaigns. This metric is the cost of encouraging potential customer for purchasing a service or product.     

Formula

Total marketing spend on customer acquisition/ Total new customers 

Role

C-Level, VP/ Director 

Audience 

Sales Manager, Marketing Manager

Variations 

Cost to acquire a new customer

Average customer acquisition cost        

 

Calculating the CAC

CAC can be measured by dividing the total cost spent on (marketing expenses) attracting more customers by the number of clients acquired on the time the money was spent. An example of it is that a company spent $100 on marketing yearly and gained 100 customers on a similar year, and then the CAC is $1.00.                                         

You must be careful in using this metric. Fortunately, you can improve the CAC through the following steps.             

 

  • Improve user value with CAC

 

You must develop qualities or features that can attract the attention of the users. You must improve your product to get more customers that can help you make your business more profitable. 

 

  • Enhance on-site conversion metrics with CAC

 

You can set up goals through Google Analytics. You can conduct A/B split testing with latest checkout systems to reduce shopping cart abandonment rate. You can also improve the site speed, landing page, mobile optimization, and other factors to improve the performance of your site. 

With the use of this metric, you can have smooth business operations.