KPI

Customer acquisition cost (CAC)

Customer acquisition cost (CAC) is a crucial KPI to track. Here's all the information you need about this KPI: what it is, why it's important, how to calculate it, and way more!

TRACK YOUR CUSTOMER ACQUISITION COST!

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What is customer acquisition cost?

The customer acquisition cost (CAC) is the total amount to acquire a new customer for your business. It includes the cost of your marketing campaigns and other marketing expenses that you have to spend in order to get a new average customer. This important business metric is particularly useful when compared with your customer lifetime value (LTV) or your return on investment to know if you spend too much (or too little) on your marketing efforts. This can also help you with various decision-making.

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How to calculate customer acquisition cost

The CAC formula is calculated by dividing the total costs spent on acquiring new customers (marketing costs) by the number of customers acquired in the period the money was spent. For example, if for one month all your marketing efforts cost about $5000 and your number of new customers is 1000, your customer acquisition cost is 5$.

The CAC calculation:

Total marketing costs / number of new customers = CAC

What is a good customer acquisition cost?

A good cost per acquisition is lower than your customer lifetime value (CLV), ideally about 3 times lower. So if your customer lifetime value is 15$ and your customer acquisition cost is 5$ or less, it's pretty good.

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What is a bad customer acquisition cost?

It all depends on your industry and business model. It is very likely that your CAC ratio in the automobile industry is quite different than a SaaS, however, the golden rule is to always have an acquisition strategy that'll actually bring money, so more paying customers, less marketing spend. 

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Customer acquisition cost KPI examples & templates

Add your customer acquisition cost to these reports for a good view of all your online marketing strategy metrics and overall online performance.

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Ecommerce report template Ecommerce report template

A report with all the most important metrics for your ecommerce site, like shopping cart abandonment, click-through rate, and revenue.

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Executive report template Executive report template

This template is filled with business metrics your C-suite will want to see. Show them your revenue, new customers, churn rate, and more. You can also add your profit margin, sales expenses and more. 

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PPC report template PPC report template

Check your conversion rate, total sales, cost of acquisition and more, from all your marketing channels. You can also track this data alongside your startup or business metrics and industry benchmark.

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Customer acquisition cost best practices

Here are some of the best practices you should keep in mind to improve your customer acquisition cost.

Customer acquisition cost best practices

step 1 icon Use the Right Acquisition Strategy

Where do you put most of your marketing efforts? Which channels does your marketing team use? Maybe some channels aren't well-adapted for your potential customer journey. Make sure all your different channels are bringing money to the bank. Social media, search engines, influencer marketing, referral websites? Trace transactional customers back to their “last touch” attribution source to have a better idea of which channels worked better than others. 

step 2 icon Optimize your landing pages

Make sure your potential customers land on a page that has the best possible probability to close them. How? Add CTAs, improve the copy, or improve the UX and readability. If you can have even a 1% difference, over multiple pages, it can mean a good amount of money over a certain period of time. So don't neglect the importance of your landing pages

step 3 icon Invest in customer retention

A good way to have a better CAC and therefore better customer relationship management is to keep your existing customers and to have a killer retention rate. Having a customer come back and buy more, costs basically nothing compared to acquiring new customers. Make sure your sales team does a good job onboarding new clients, and that the customer relationship is just as good throughout the sales process. This could be done by implementing a loyalty program, or referrals. Particularly for SaaS companies, customer retention can change the game. 

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Customer Acquisition Cost Synonyms

Although customer acquisition cost is widely used, there are multiple synonyms that can be used. Here are a few : 

Cost per conversion, Cost per acquisition (CPA), Cost per action (CPA), Cost per customer, Cost per client, Cost per new client, Cost per new customer, Cost of customer acquisition (COCA)

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