Customer Acquisition Cost

Understanding the cost of acquiring a user/customer is essential to building a successful business. The data helps you know which customer demographics are the most profitable and how efficient your business is.

As the name suggests, this metric is intended to include all costs in acquiring a user/customer. However, it can be challenging to accurately portray CAC in a single metric if you have multiple target markets (e.g., SMB & enterprise) or sales strategies (e.g., paid marketing & organic acquisitions).

In addressing CAC for multiple target markets, you should look at each demographic separately. It is vital to view the market segments individually because acquiring an SMB client will differ from an Enterprise client. Looking at these in a combined metric will inaccurately inflate SMB cost and present the Enterprise CAC as better than it is. Always examine each segment separately. 

Here are some ways to calculate CAC:

Blended CAC

Total Acquisition Costs / Total Amount of New Customers

Paid CAC

Total Acquisition Cost / New Customers Acquired by Paid Marketing

Companies often overly focus on top-line growth at all costs, but monitoring the costs of a single user/customer should be a priority. CAC will help you identify that your business needs more investment in sales/marketing and which customer segments should be your focus.