Business Development Glossary
Customer Acquisition Cost
Meaning & Definition
Customer Acquisition Cost (CAC)
- Definition: The total cost of acquiring a new customer, including marketing, sales, and operational expenses.
- Key Components:
- Marketing Expenses: Costs for advertising, content creation, and campaign management.
- Sales Costs: Salaries, commissions, and tools for sales teams.
- Operational Costs: Infrastructure and technology expenses supporting acquisition efforts.
- Customer Lifetime Value (CLV): The expected revenue generated from a customer over their relationship with the company.
- Formula:
- Steps to Optimize:
- Analyze spending on marketing and sales channels.
- Identify high-performing acquisition strategies and allocate resources accordingly.
- Streamline sales processes to reduce costs.
- Improve customer retention to maximize the value of acquired customers.
- Benefits:
- Provides insights into the efficiency of marketing and sales strategies.
- Helps set realistic budgets and improve ROI.
- Enables data-driven decisions for scaling customer acquisition efforts.
- Balances acquisition costs with long-term revenue goals.
