Customer acquisition cost (CAC) calculator

CAC (customer acquisition cost) evaluates how much you spend on acquiring one customer. CAC is usually calculated for a certain time period — a week, a month, or a duration of a promotional campaign.

CAC is often estimated alongside the customer’s lifetime value (LTV). LTV estimates the total revenue one customer brings throughout their relationship with your business. The ratio between these metrics shows how profitably a business works.

To get your CAC, you need to divide the amount spent on customer acquisition by the number of customers you have. Calculate your customer acquisition cost in our CAC calculator below.

CAC Calculator

How much does it cost to acquire one customer?

Enter the data for one time period (a day, a week, a month, or the duration of a promotional campaign):

Select the currency for calculations

All the values you enter should be in the same currency

Marketing campaigns costs

The money you spent on social media and contextual advertising or banners

Employees’ salaries

The money marketers and other employees were paid for the project

Software costs

The costs of hostings, email service providers, product recommendation platforms, and other

Additional services costs

Did you hire contractors or consultants? Enter their wages here

Other marketing costs

In case we forgot anything

Number of customers you got for that sum of money

For the same time period as the spendings

The acquisition of one customer costs

CAC is compared to the customer’s lifetime value (LTV). The only way to know whether you are getting customers profitably or at a loss is to calculate the LTV to CAC ratio.

Here’s how you can view the ratio (based on the article by Corporate Finance Institute.

LTV:CAC = 1:1 or less

The business is working at a loss, you need to make changes as soon as possible.

LTV:CAC = 2:1

Customers bring two times more money than it costs to acquire them.

LTV:CAC = 3:1

This is the optimal ratio to hit. It means the business model is profitable.

LTV:CAC = 4:1

The business is very lucrative: acquiring customers is cheap, and they bring great value to the company.

Other aspects that affect the rate

Your business’ CAC can be higher or lower depending on these factors:

Company age and industry. Newer companies and those entering a new market will naturally have a higher CAC since they’re just starting out. Plus, some industries are more competitive than others which can also rank up the acquisition costs.
Marketing channels. The cost per advertisement can differ from one platform to another. That’s why it’s a good idea to calculate CAC for each marketing channel separately and compare their effectiveness.
Sales process. It’s beneficial to evaluate CAC in connection with the average sales cycle length. For example, if your sales cycle is longer than a month, a month-to-month CAC estimation won’t be telling. In that case, it’s best to analyze an average CAC for 3 months or half a year.
Target market. If your business operates on a subscription model, a higher CAC is not that alarming. The acquisition may cost you more than the monthly amount of money you get from that person, but the payments are recurring, so it’s actually a normal situation.

Best tips to improve your CAC

If your CAC is higher than you’d like, here are some strategies to improve it.

First of all, examine your marketing campaigns and advertising. They need to clearly show the value of your products or services. If customers can understand the benefit they’ll get from your business right away, they can make the purchase faster.

Investing in customer relationships can help too. Make customer experience a priority and engage with leads offering personal communications. Another strategy is to request referrals. This way your existing customers can bring in the new ones practically for free.

Don’t ignore customer feedback. Ask your customers to leave reviews, send out surveys, or conduct interviews. This way you’ll learn your business’ strengths and weak points and then act on your findings.

Meet leads where they are: maybe your customers expect digital experiences you don’t offer yet. For example, younger people might opt out of a marketing offer if they need to make a call to get it.

Conclusion

Now that you know how to calculate CAC, monitor the rate regularly. Seeing it in dynamic helps to determine which areas need to be focused on more, what works well, and what doesn’t.

To get the most out of your analytics, monitor other metrics as well. To do so, check out our other services:

22 March, 2023

#CAC #calculator #metrics #tools

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Diana Kussainova

Writer, editor, and a nomad. Creating structured, approachable texts and helping others make their copies clearer. Learning and growing along the way. Interested in digital communications, UX writing, design. Can be spotted either in a bookshop, a local coffee place, or at Sephora. Otherwise probably traveling. Or moving yet again.

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