Customer Acquisition Cost (CAC) shows how much a business is investing to win over each new customer.

Digital Marketing is the paradise of metrics.

On the web, everything can be measured – from the number of people who accessed a website to the second a person stopped watching a video on YouTube.

From the most generic to the most specific, all the data is at our fingertips.

Ok, but at the end of the day, all a manager or entrepreneur wants to answer is: are my campaigns performing?

This is where the importance of analyzing the indicators that really matter comes in for the company to evaluate its strategies.

The Cost of Customer Acquisition (CAC) is one of the Marketing metrics that you cannot fail to monitor, since it translates the performance of the business in financial terms, which in the end, is what really proves the value of Digital Marketing.

In this post, we are going to talk about all the details of the CAC, how to calculate it, what is its importance and how to improve that number to bring more positive results for your business. Let’s unveil this metric:

What is CAC?

Customer Acquisition Cost (CAC) shows how much a business is investing to win over each new customer.

The CAC involves the work of the team throughout the entire sales funnel, from attracting visitors, nurturing leads to closing the purchase.

Therefore, to be clear in the calculation of this cost, the ideal is that there is previously a control over the sales process, especially how many customers it is capable of generating and what investment each step requires.

The more data you have about your avatar final expense leads sales cycle and all that it entails, the more practical it is to calculate the CAC and the adjustments necessary to improve this metric.

How to calculate the cost of customer acquisition?

The CAC calculation is simple: it is enough to divide the sum of the investments to acquire a client by the number of clients acquired in a certain period.

Let’s say that, in one quarter, your company invested US $ 5,000 in the areas of Marketing and Sales and won 10 new clients. Your CAC is US $ 500.

Simplifying, the formula looks like this:

CAC = sum of investments / number of customers acquired

Although the formula is easy, you need to be careful in some points so as not to mask reality.

Investments to be considered in the calculation
The sum of investments should consider only the expenses directly involved in the acquisition of customers, which generally involves the areas of Marketing and Sales. Disregard, for example, the costs with the administrative area, SAC and product development.

What, then, should go into that sum? Be transparent with yourself, include everything that is involved in your disclosure, relationship and sale strategy:

  • Team salaries
  • Sales commissions
  • Employee training
  • Tool acquisition
  • Software subscription
  • Buying Ads
  • Participation in events
  • Press advice
  • Printed materials
  • Travels
  • Phone contacts
  • Etc.

Clients to be considered in the calculation
Regarding the number of clients, this logic also applies: only those directly conquered by investments in Marketing and Sales enter into the calculation.

For example, a blogger spontaneously quotes your brand and generates a customer for you. This acquisition should not enter into the calculation, because that channel was not in your strategy and you did not dedicate any effort or investment to it.

Period to be considered in the calculation
Also, the CAC must be analyzed within a specific time period. The periodicity can be monthly, bimonthly, quarterly, semi-annually, annually, or whatever is more consistent for your business.

But keep in mind that, if you analyze month by month, you will be able to make improvements more quickly.

And also keep an eye out for variations that may occur.

In a business that is starting to use Content Marketing, for example, it is natural that the volume of new customers does not compensate for investments, because the implementation of the strategy is demanding and the return usually comes in the long term. So the CAC will probably be high.

In a given month, there may also be an investment outside the curve, such as hiring a new tool. But, over time, the value of the CAC should stabilize and you will have a clearer notion of the performance of your strategies.

How do you know if your CAC is good?

After doing the calculation we taught above, you may wonder: how do I know if that number is good for my business?

Each area of ​​activity or type of company has a different CAC average. So we have bad news: it is not possible to determine a reasonable value of Customer Acquisition Cost for all markets.

But don’t be sad: the good news is that if you look inward, you will have the answer you need. Look:

If you have a one-time shopping company (a shoe e-commerce, for example), your CAC must be less than the average ticket spent by the customer in your store.

Let’s say that your CAC in the last month has been US $ 500 and the average ticket was US $ 400. In that case, you are having a loss of US $ 100 in the acquisition of each new client. If you do not adjust your strategies, you may be on the right track to sink your company …