Search
Share

CAC Banner


In the customer service vocabulary, Customer Acquisition Cost (CAC) is one of the most important and widely used acronyms among industry professionals. An insightful and revealing business metric, CAC can determine resources that are required for a company to attract new customers and find areas for growth, in both generating customer leads and identifying new services or products to offer.


Why you should care about knowing your CAC

Another way to think of CAC is the metric to calculate the cost of converting a potential lead into a customer. CAC can help you calculate the amount of money you spend on attracting customers compared to those gained or converted, determining profitability for your business.


While CAC is not a new idea by any means, innovations in tech over the past decade have brought significantly better analytics and data collection methods for calculating your CAC, leading to better allocation of money and resources. Knowing your CAC has additional benefits, too:


  • Truly evaluate marketing budgets and promotional campaigns, moving beyond theoretical effectiveness to actual effectiveness measured in conversions

  • Measure the effectiveness of your inbound or outsourced customer service call center. If customer service staff are delivering high-level customer satisfaction and creating positive customer experiences, your CAC can shift as more loyal customers are retained

  • Generate free customer outreach by way of word-of-mouth gained from both customer service and clever promotions and advertising, helping you lower your CAC even further

Before you can figure out the data and start analyzing it, you need to calculcate your CAC. Here's how to get started:


Calculating your CAC

To compute the cost to acquire a customer (CAC), you would take your entire cost of sales and marketing over a given period, including salaries and other headcount-related expenses, and divide it by the number of customers that you acquired in that period. CAC helps you rethink your business expenses as entirely centered on customer conversions this way - even the money you spent on office cleaning is factored in.

CAC Calculation from HubSpot

In pure web businesses, where the headcount doesn’t need to grow as customer acquisition scales, it’s useful to look at customer acquisition costs without the staffing costs. Since you aren’t necessarily burning more money to meet demand, but you are still experiencing growth and likely investing in branding work, this method gives you a more accurate picture of your CAC.