What Is The CAC Formula and Why It Is Matter?

What the CAC (Customer Acquisition Cost)?

CAC or Customer Acquisition Cost is actually the entiretyrate of acquiring new costumers. This includes various departments or factors including advertising costs, marketing costs, marketing team costs, additional costs, salesperson cost which is then divided by the number of customers you have acquired through these means. This helps in understanding and investing properly so that with your company growth there are no loses involved.

This is important because when business CAC is greater than your revenue, you might soon have to close down your business.

How Can We Measure CAC?

CAC is computed keeping in mind the totalityrate of obtaining customers (this might include several factors) over the period by the number of new customers that have been acquired over that period of time.

CAC Modus Operandi

CAC= (full amount of marketing and sales cost)/ (# of customers gained)

For example, one company has spent $100 on marketing and have gained 100 customers, the CAC would be $1.00. You can measure CAC to understand whether you need to bring some changes to your marketing strategy to engage more customers or not.

Customer Lifetime Value (LTV)

Over time, LTV is the revenue that you get from any given customer with CAC. Usually, most companies go for a 1-3-5 year LTV calculation. Though for LTV, a huge amount of historical data is important for accurate calculation. LTV helps in increasing the maturity of your business decision making.

Customer Costs by Industry

Customer costs could differ greatly for various industries due to so many factors including purchase value, length of sale cycle, company maturity, the customer lifespan and a lot more. For any travelling industry customer cost could be $6 while for the technology industry, it could be higher.

How to Improve Your CAC?

  • Trying Improving On-Site Conversion Metrics:

Here are ways of using Google analytics by which you could decrease the abandonment of shopping carts and improvise the landing page of any website. Consider the factors to bring a change to site performance.

  • Implement CRM:

This is another crucial way to improve CAC. The sales team could be a complex one using cloud tracking and tools that will help in enhancing customer trust and visit.

  • Trying Enhancing The User Value:

If you are able to please your users with some additional features, it might improve the quality of user interaction affecting user value.

For more detailed information there are so many guidelines and handy tips that help you understand thoroughly the importance of CAC and how you could improve it.