Customer Acquisition Cost (CAC) is a metric that represents the total cost a business incurs to acquire a new customer. It includes all the expenses associated with sales and marketing activities that are intended to attract and convert new customers.
The formula for calculating CAC is as follows:
CAC = (Total cost of sales and marketing) / (Number of new customers acquired)
For example, if a company spends $100,000 on sales and marketing activities in a given period and acquires 1,000 new customers during that period, the CAC would be $100 per customer.
CAC can be a valuable metric for businesses to track, as it provides insights into the efficiency and effectiveness of their sales and marketing efforts. By comparing CAC to the Lifetime Value (LTV) of a customer, businesses can determine whether their acquisition costs are sustainable and whether they are acquiring customers profitably. Ideally, a business wants to keep CAC as low as possible while still acquiring customers with high LTVs.
DTC, or direct-to-consumer, refers to a business model where a company sells its products or services directly to consumers, bypassing traditional retail channels.
Customer Lifetime Value (CLV) represents the total funds a consumer spends at a business for products and services without any specific time measurements restricting the data.
Out of Home (OOH) advertising refers to any form of advertising that reaches consumers while they are outside their homes or workplaces.
