Companies spend money on attracting and converting potential customers (leads) into paying ones. This cost is called the Customer Acquisition Cost (CAC). According to ProfitWell, CAC jumped roughly 60% from 2014 to 2019. But on the bright side, McKinsey & Company reports that the move to online sales has made acquiring customers 30% more efficient for businesses in recent years.
Every business wants to spend less to get new customers, and selling online is one way to achieve that.
What is Customer Acquisition Cost (CAC)?
Simply put, CAC is how much a company spends to acquire a new customer. It helps businesses understand how well their efforts to get customers are paying off (their return on investment or ROI). Here’s what CAC includes:
- Marketing and advertising costs: This covers salaries, subscriptions to marketing tools, relevant technology (like software for gathering data or running Google Ads), creating marketing materials, running traditional or digital campaigns, and more.
- Sales costs: This includes salaries, relevant technology (like tools to generate leads and manage emails), keeping inventory stocked, travel expenses, gifts for potential customers, and so on.
Why CAC Matters
Knowing your CAC is important because it helps you:
- Improve your marketing and sales efforts: By understanding your CAC, you can see what’s working and what’s not, and make adjustments to improve your results.
- Plan your sales budget: Knowing your CAC helps you figure out how much you can afford to spend on acquiring new customers.
- Identify weaknesses in your sales funnel: A high CAC might indicate problems in your sales process, like not getting enough leads. Tracking CAC by stage in your funnel can help you pinpoint areas for improvement.
- Streamline your sales process: Good lead management and effective sales prospecting techniques can lead to a more competitive CAC.
- Boost your sales performance: By tracking and improving your CAC, you’ll gain a clearer picture of your sales pipeline and how well it’s working towards your sales goals.
How to Calculate CAC Manually
Here’s a step-by-step guide to figuring out your CAC yourself:
- Pick a timeframe to analyze (e.g., a month, quarter, or year).
- Add up all your sales and marketing expenses for that period.
- Divide your total sales and marketing expenses by the number of new customers you acquired in that timeframe.
- This will give you your customer acquisition cost.
If you wanna follow the CAC of your company, discover the My Office Data, a FREE SOFTWARE that allows you to register and manage all your company data, click on link bellow to register and start