Customer Acquisition Cost

Definition

Customer Acquisition Costs are the marketing and sales expenditures associated with acquiring a new customer.

Why use it

Customer Acquisition Cost can be set in relation to Customer Lifetime Value which enables you to optimize the return on marketing and advertising investments. It can also be calculated seperately for different marketing channels to compare their associated costs in order to focus on the right channels.

 

IncludeDon’t include
  • Marketing spendings
  • Sales spendings
  • Users of trial accounts before they migrate to paid accounts

 

AliasCost Per Acquisition
AbbreviationCAC
UnitCurrency (Euro/Dollar/YEN/…)

 

Calcuatio

CAC can be calculated by adding up all marketing and sales expenditures of a period and dividing the sum by the number of acquired customers of the period.

Note: The time until marketing and sales expenses trigger a sale has to be taken into account. If the sales cycle is longer it is advisable to undertake the calculation for a longer period of time e.g. a quarter or a year.

∑ marketing & sales spendings
÷ ∑ of acquired customers
CAC

Example

In the first quarter of 2018 a company had marketing and sales expenses of 10.000 € and acquired 400 new customers.

10.000 €
÷ 400
25 €