Glossaries
CAC
What is CAC (Customer Acquisition Cost)?
CAC, or Customer Acquisition Cost, is the total cost a business incurs to acquire a new customer, including marketing and sales expenses.
Synonyms: Customer Acquisition Cost, Cost of Acquiring Customers, Customer Cost, Cost Per Acquisition
Why CAC is Important in Growth Hacking
Understanding and optimizing CAC is crucial for growth hackers and businesses aiming to scale efficiently. A low CAC indicates effective marketing strategies and sustainable growth, while a high CAC may signal the need for optimization in customer acquisition methods.
How to Calculate CAC
To calculate CAC, divide the total costs associated with acquiring new customers (marketing and sales expenses) by the number of new customers acquired in a specific period:
CAC = Total Acquisition Costs / Number of New Customers
For example, if a company spends $10,000 on marketing and acquires 100 new customers, the CAC would be $100.
Strategies to Reduce CAC
Growth hackers employ various techniques to lower CAC and improve marketing efficiency:
- Optimize marketing channels
- Improve targeting and personalization
- Implement referral programs
- Enhance conversion rate optimization (CRO)
- Leverage content marketing and SEO
Frequently Asked Questions
- What's a good CAC?: A good CAC varies by industry, but generally, it should be significantly lower than the customer lifetime value (LTV).
- How often should I calculate CAC?: It's best to calculate CAC regularly, such as monthly or quarterly, to track trends and the effectiveness of your marketing efforts.
- Can CAC be too low?: While a low CAC is generally good, an extremely low CAC might indicate underinvestment in growth, potentially limiting your market reach.