Customer Acquisition Cost (CAC)

About

Customer Acquisition Cost (CAC) is a crucial business metric that measures the average cost of acquiring a new customer over a specific period. It encompasses all expenses related to marketing, advertising, and sales efforts, including employee salaries, software costs, and consulting fees. CAC is calculated by dividing the total acquisition costs by the number of new customers acquired during that time. CAC varies significantly across industries, with B2B companies typically having higher costs due to longer sales cycles and more complex decision-making processes. In contrast, B2C companies often have lower CACs due to quicker sales cycles. Understanding CAC is essential for evaluating marketing efficiency and profitability, especially when compared to Customer Lifetime Value (CLV). A higher CLV can justify a higher CAC, indicating potential for long-term revenue growth.