Expert answers about Customer Acquisition Cost calculation and optimization
What is Customer Acquisition Cost (CAC)?
Customer Acquisition Cost (CAC) is a critical business metric that measures the total cost of acquiring a new customer. It's particularly important for SaaS, e-commerce, and subscription-based businesses where customer lifetime value plays a crucial role. CAC helps evaluate marketing efficiency, scalability, and overall business health.
How is CAC calculated?
While the basic formula is Total Marketing & Sales Costs / New Customers Acquired, sophisticated businesses track CAC by:
Marketing channel (Paid ads vs Organic)
Customer segment (Enterprise vs SMB)
Geography (Different markets)
This granular tracking enables more strategic budget allocation and optimization.
What's a good CAC benchmark?
Good CAC varies by industry:
B2B SaaS: $200-$300 for SMB, $7000-$10000 for enterprise
E-commerce: $15-$200 depending on product category
Financial Services: $100-$500
A healthy business typically maintains a 3:1 LTV:CAC ratio and recovers CAC within 12 months.
How can I reduce my CAC?
Modern strategies to reduce CAC include:
Implementing product-led growth strategies
Utilizing AI for ad targeting optimization
Developing customer advocacy programs
Optimizing onboarding processes
Using predictive analytics for better targeting
A/B testing landing pages and conversion paths
What costs should I include in CAC?
Include all acquisition-related costs:
Marketing and advertising spend
Sales team salaries and commissions
Technology stack costs (CRM, automation tools)
Content creation and marketing overhead
Sales enablement and training costs
Customer support during sales process
Partner and referral program fees
How does CAC relate to other metrics?
CAC should be analyzed alongside:
Customer Lifetime Value (LTV) - Should be 3x higher than CAC