Customer acquisition cost or cost of acquisition is a central indicator for all sales companies. It represents the total costs incurred to attract a new customer, including advertising expenditure, marketing campaign costs, sales team salaries, and all expenses linked to the conversion of a new customer. The main purpose of this indicator is to measure the profitability of marketing strategies implemented over a given period. For example, a low acquisition cost in relation to the long-term value of the customer means a good return on investment for the company. If the opposite is true, then it means that the company would be well advised to review its strategy’s setup…
CALCULATE CUSTOMER ACQUISITION COST
Customer acquisition cost sheds light on all the actions taken to win a new customer. The higher this figure is, the more it suggests that actions need to be numerous or costly, providing important information for optimizing campaigns.
Customer acquisition cost is a helpful guide to decision-making. For example, if certain campaigns or channels have a particularly low acquisition cost, the company may decide to invest more in these areas. Conversely, high costs may indicate the need to rethink or abandon certain channels or strategies.
By comparing this with the results of calculating customer lifetime value (CLV), the sum total of revenue generated by a customer throughout their relationship with the business, entrepreneurs can understand the profitability of their strategy. If the cost of acquisition is higher than the value of the customer, the company loses money for each new customer acquired, which isn’t viable in the long term…
With a clear view of the customer acquisition cost, it’s then possible to identify the most effective marketing channels. If a campaign on a particular social network attracts a large number of customers at a low cost, then it’s preferable to increase investment in that channel.
This data can also be used to assess a business's financial health. A cost that’s too high in relation to the value provided by the customer may signal problems in the marketing strategy or low conversion efficiency. By monitoring this indicator, companies can quickly adjust their actions to improve profitability.
| 💵 Marketing costs ($) | Total expenditure on marketing activities to acquire new customers. |
| 👤 New customers acquired | The total number of new customers gained as a result of the marketing efforts. |
| 📊 Customer Acquisition Cost (CAC) | The cost of acquiring a new customer, calculated as total marketing costs divided by the number of new customers. |
HOW TO CALCULATE CUSTOMER ACQUISITION COST?
Add the sum of all your marketing actions in dollars and then the number of customers converted thanks to these actions, and you’ll obtain your customer acquisition cost in dollars in a single click with our calculator.
OUR TIPS FOR OPTIMIZING YOUR PRODUCTION COST
Maximize your profitability: that's the goal of any sales company that wants to survive in the long term. To achieve this, your customer acquisition cost must be as optimal as possible. How can this be achieved?
- Target your customers precisely: refine your targeting to reach those customers most likely to be interested in your products or services. Create precise customer personas.
- Analyze and control your customer journey: simplify the buying process to reduce friction and increase conversions, for example by reducing the number of payment steps, or offering multiple payment options.
- Boost your visibility: invest in quality content marketing that educates, informs and engages your target audience.
- Choose your communication channels: focus on platforms where your target audience is most active, and use targeting to deliver relevant messages.
- Optimize your SEO actions: organic traffic often has a lower CAC and can establish your reputation over the long term.
- Switch to marketing automation: like with personalized emails, chatbots, etc.
- Think partnerships: why not partner with others? Partnerships with other companies will extend your reach, and you'll be able to access new market segments in a cost-effective way.
CUSTOMER ACQUISITION COST FAQ
What is customer acquisition cost?
Customer acquisition cost (CAC) is a term used to designate the total amount spent to acquire a new customer. This cost represents all marketing and advertising expenditure divided by the number of customers acquired over a given period. You can also obtain this result by calculating the cost per lead.
By analyzing CAC, companies can optimize their marketing spend by focusing on the most effective channels and adjusting their strategies to reduce costs.
How do you calculate CAC?
CAC, or customer acquisition cost, is calculated by dividing the sum of all marketing expenses related to the acquisition of a new customer by the number of customers.
For example, if a company spends 1,000 dollars on advertising and obtains 10 new customers, the cost of acquisition per customer is 100 dollars. This calculation helps companies understand the effectiveness of their marketing strategies and manage their budgets more efficiently.
What are the different elements that make up customer acquisition cost?
Customer acquisition cost is made up of several elements, mainly related to marketing and sales efforts. Here is a non-exhaustive list of all the expenses considered:
- Advertising expenses: all expenses incurred in advertising campaigns, whether online (ads on social networks, search engines, web banners) or offline (TV ads, posters, flyers).
- Marketing expenses: the cost of all marketing activities other than advertising, such as content marketing, email marketing, events, and public relations.
- Marketing tools and software costs: costs associated with digital marketing tools, marketing automation software, CRMs, etc.
- Salaries of the teams involved: salaries, commissions, and other benefits granted to the sales team and marketing team in priority.
- Content production costs: the cost of creating marketing content, including videos, blog posts, infographics, and any other content used to attract the attention of potential customers.
- Overhead: costs associated with the infrastructure required to run marketing campaigns, such as web hosting, data services, etc.
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