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.
Stock Keeping Units, or SKUs, are alphanumeric codes that retailers assign to track products. The information helps them identify specific inventory items, measure sales, and promote more efficient shopping experiences.
A UTM, or Urchin Tracking Module, is a code snippet that is added to a URL to track the performance of digital marketing campaigns.
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.