What is CAC (Customer Acquisition Cost)?
CAC stands for Customer Acquisition Cost and is a term for what it costs your company to acquire a new customer. CAC can be translated as: the price of acquiring a customer.
It is essential that you know the cost of acquiring a new customer, as it fundamentally determines whether your marketing is successful and delivers an attractive ROI. There is no getting around it — acquiring new customers costs resources and money — but without a sense of your CAC, you do not know how much.
And how do you know which way is best and most cost-effective for acquiring new customers? Including which channel has the lowest CAC, which messages, campaigns, etc.
How to calculate CAC
Your overall CAC is calculated as follows:
Formula for calculating CAC (Customer Acquisition Cost)
CAC = All marketing and sales costs / Number of new customers
E.g. if you spend 100,000 DKK on sales and marketing and acquire 100 new customers:
100,000/100 = 1,000 DKK is therefore what acquiring a new customer costs you
You can calculate your CAC both at an overall level — e.g. across selected time periods to compare and measure progress — and for individual channels, campaigns, target audiences, etc. to see how you best acquire new customers.
How to achieve a lower Customer Acquisition Cost
Having as low a CAC as possible is fundamentally the idea behind all marketing: how do we acquire new customers and more revenue in the best and most cost-effective way?
Once you start using CAC as a KPI — together with other relevant KPIs such as CLV, etc. — you will know how much each new customer costs you and can begin to explore how to get this figure as low as possible.
To achieve a lower CAC, you can adjust the following, among other things:
- Overall marketing and sales strategy
- Choice of marketing channel
- Messaging
- Content
And much more.
Would you like concrete advice, sparring and help achieving a lower CAC?
Call us on 30 12 42 72 and we will have a chat.
