What is customer acquisition cost?
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Customer Acquisition Cost (CAC)

What is customer acquisition cost? Customer acquisition cost (CAC) is the cost associated with acquiring a new customer. It’s calculated by dividing the total cost of marketing and sales efforts by the number of new customers acquired.

How does customer acquisition cost work? This metric provides understanding about how much a marketer is spending to attract first-time shoppers. In terms of the channels where CAC happens, display ads play a part, but the most effective channels include content marketing, social media, podcast/streaming ads, and email marketing. 

Types of customer acquisition cost:

  • Direct CAC: This includes all costs directly associated with marketing and sales, such as advertising, salaries, and commissions.
  • Indirect CAC: This includes all other costs associated with customer acquisition, such as product development, customer support, and order fulfillment.

How to measure customer acquisition cost: CAC is calculated by dividing the total cost of customer acquisition by the number of new customers acquired during a specific period of time. The total cost of customer acquisition includes all costs associated with marketing, sales, and other activities related to attracting and converting new customers. For example, if a business spends $100,000 on customer acquisition and acquires 1,000 new customers, its CAC would be $100.

Why is customer acquisition cost important to marketers? CAC helps advertisers improve their marketing efforts and reduce the expense of bringing in new business.

Who needs to know what customer acquisition cost is:

  • Digital marketing manager
  • Paid search specialist
  • Social media manager
  • Content marketing manager
  • Affiliate manager
  • E-commerce manager
  • Product manager
  • Marketing analyst
  • Brand manager

Use customer acquisition cost in a sentence: “By encouraging people who buy clothes from us to share their images on our social media channels, we’re able to lower our customer acquisition costs by relying on user-generated content in our promotions.”