Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the total cost associated with acquiring a new customer, including marketing and sales expenses.

Why it matters

Helps evaluate the efficiency of marketing strategies.
Essential for calculating profitability and growth potential.

How to measure

Total marketing and sales costs divided by the number of new customers acquired.
Typically measured monthly or quarterly.

Details

In the mobile context, CAC is crucial for understanding the cost-effectiveness of user acquisition campaigns. Mobile engineers and growth teams can use CAC to optimize their marketing spend by identifying the most cost-effective channels. This metric also aids in forecasting the budget needed to scale user acquisition efforts.

Accurate CAC measurement requires comprehensive tracking of all marketing and sales expenses, including digital advertising, content marketing, and sales team salaries. By comparing CAC with the Lifetime Value (LTV) of a customer, teams can assess the sustainability of their growth strategies.

Examples & formulas

For example, if a company spends $10,000 on marketing in a month and acquires 100 new customers, the CAC is $100.

CAC = Total Marketing Costs / Number of New Customers

Common mistakes

Ignoring indirect costs like overheads, which can lead to underestimating CAC.
Failing to segment CAC by channel, which can obscure the performance of individual marketing efforts.