What does Customer Acquisition Cost (CAC) mean?
The total cost associated with acquiring a new customer, including marketing and affiliate commissions.
AnalyticsFinancial MetricsProgram ManagementDifficulty: Advanced
Definition
Customer Acquisition Cost (CAC) measures the total expense required to convert a prospect into a customer, including affiliate commissions, marketing expenses, and related costs. Understanding CAC is crucial for maintaining profitable affiliate programs and optimizing marketing spend across different channels.
Examples
- Affiliate commission costs
- Marketing campaign expenses
- Platform fees
- Support costs
- Sales process expenses
Common Mistakes
- Incomplete cost tracking
- Ignoring indirect costs
- Poor channel attribution
- Inaccurate calculations
- Overlooking lifetime value
Best Practices
- Comprehensive cost tracking
- Channel-specific analysis
- Regular monitoring
- ROI comparison
- LTV consideration
FAQs
- How do I calculate CAC?
- Divide total acquisition costs (marketing, commissions, related expenses) by the number of new customers acquired in a specific period.
- What's a good CAC?
- Acceptable CAC varies by industry and business model. Generally, aim for CAC to be recovered within 12 months through customer revenue.
- How can I reduce CAC?
- Optimize conversion rates, improve targeting, test different channels, adjust commission structures, and enhance customer experience.
Tools
- CAC calculators
- Analytics platforms
- Financial tracking tools
- Attribution software
- ROI analysis tools
Resources
- CAC Calculation Guide
- Cost Optimization Tips
- Channel Analysis Template
- ROI Measurement Guide
Expert Tips
- Track all cost components
- Compare channel performance
- Monitor trends over time
- Balance CAC with LTV