Customer acquisition cost refers to the capital spent on acquiring a new customer and in convincing them to buy your product. CAC is an important metric for any business. Its formula is as followed:
CAC= Sales and marketing expense/ Number of customers acquired.
Sales and marketing expenses include advertising costs, incentives, bonuses, and salaries paid to market and sales executives. The number of new customers refers to the total number of acquired customers in a fixed time period.
Calculating Customer acquisition costs is important as through this your business can figure out the most cost-effective way of landing customers which will eventually give better returns on your investment.
By calculating CAC you will get to know your profit margins and you can also push them further if needed by using the insights provided by CAC.