How to calculate Customer Acquisition Cost?

Customer Acquisition Cost (CAC) is a vital metric for businesses, indicating the cost involved in acquiring a new customer. It encompasses expenses related to marketing, sales, and any other activities for attracting new users or clients.



Example:
An Indian e-commerce platform spends ₹1,00,000 on a digital marketing campaign and acquires 100 new customers.

The CAC would be calculated as follows:
CAC = Total Marketing Spend / Number of Customers Acquired
= ₹1,00,000 / 100 = ₹1,000 per customer.



Significance of CAC:
Understanding CAC is crucial for evaluating the effectiveness of customer acquisition strategies. A lower CAC indicates a more efficient strategy, impacting the business's profitability and cash flow positively.

The CAC formula is:
CAC = Total Marketing Spend / Number of Customers Acquired.

Monitoring CAC over time is important for understanding how acquisition costs trend and for strategic budgeting and forecasting.

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