--- layout: default_v3 language: default permalink: customer-acquisition-cost/what-is-customer-acquisition-cost.html i18n_link: 3523 updated: 2023-01-11 #--- article key-values ---# collection: default_topiccluster t_keyword: What Is Customer Acquisition Cost tags: customer acquisition cost, cost of acquiring a customer, customer cost, cac, what is cac, what is customer acquisition cost, how to calculate customer acquisition cost, calculate cac type: supporting page_id: 3523 hreflang_id: 3523 parent_id: 3505 date_published: 2021-04-16 date_modified: 2023-01-11 #--- javascript schema ---# javascript_schema: - script: jquery_3_2_0_min - script: bootstrap_min - script: article_infinite_scroll - script: article_mix_infinitescroll - script: article_mix - script: article_mix_faq - script: article_mix_toc #--- section schema ---# section_schema: - section: nav-main_menu - section: article_body_v2 - section: footer - section: schedule_demo_cta #--- page key-values ---# meta_tags: t_meta_title: What is Customer Acquisition Cost? Definitions, Comparisons, & More t_meta_description: Business professionals may wonder, what is customer acquisition cost and why does it matter? t_meta_abstract: Business professionals may wonder, what is customer acquisition cost and why does it matter? i_meta_image: article_body: json-ld_article: v_date_published: 2021-04-16 v_date_modified: 2023-01-11 author: p_author_id: 203 t_author: Priyanka Bhadani p_author_url: priyanka-bhadani.html i_author: 203.png t_author_description: Mary Kate Morrow is a writer, editor, and social media professional currently employed as a Digital Content Writer at Altametrics. She previously graduated with both a Bachelors degree in English Language and Literature and a Bachelors degree in Gender Studies from the University of California, Los Angeles. p_author_facebook: //www.facebook.com/HubWorksApp p_author_twitter: https://twitter.com/HubworksApp p_author_linkedin: p_author_instagram: feature_snippet: p_type: text t_title: t_description: content: heading: t_title: What is Customer Acquisition Cost? Definitions, Comparisons, & More t_description: Business professionals may wonder, what is customer acquisition cost and why does it matter? image: i_image: what-is-customer-acquisition-cost-definitions-comparisons-more-1618543986-7159.png t_image_description: number customers acquired period cost customer customer ltv reduce cac v_image_attribution: //pixabay.com/photos/tie-necktie-adjust-adjusting-man-690084/ v_image_license: Creative Commons Zero v_video: paragraphs: - t_headline: What is Customer Acquisition Cost? t_text: Customer acquisition cost is a valuable business metric that all professionals should understand. Customer acquisition cost, commonly abbreviated as CAC, is the total cost of new customers attained. Calculating CAC incorporates everything from sales team salaries to search engine optimization technology investments.

Each business is different so no universal CAC formula works for every organization. However, there is a commonly agreed upon customer acquisition cost formula. This CAC formula is the total cost of money spent on sales and marketing divided by new customers acquired.

Customer acquisition costs supply businesses with a lot of valuable information. Knowing the cost per customer of various marketing efforts guides decision making. Customer acquisition costs reflect conversion rate and marketing spend effectiveness. There are dire consequences to ignoring customer acquisition costs. When customer acquisition cost is higher than revenue for a long time period a business may need to close. p_headline_type: h2 image: i_image: t_description: v_attribution: v_license: video: v_video: sAlWDSrwqyo v_video_language: default t_name: 7 Client Acquisition Methods t_description: Today's video is going to be HUGE for you if you run a service-based business.In other words, if you are a coach, consultant, freelancer or solo entrepreneur who uses their skills and trades time for $$, you NEED to watch this.Basically, I'm going DEEEEP today and breaking down seven different methods for finding customers.You'll love it!----------The Anatomy of a $50k/mo Agency (Cheatsheet)- //bit.ly/2ZaSAfYOur top-rated growth accelerator for agency owners- //www.AlphaMentorship.com/profit-paradigmListen to The Daniel DiPiazza Show-//www.AlphaMentorship.com/podcastRead Daniel's Bestselling Book "Rich20Something"- //amzn.to/2EHOqqN----------The Essentials My Best Ideas, Delivered Daily via email newsletter-//www.danieldipiazza.com/Slide into my DMs-//www.instagram.com/rich20something/Facebook (for anyone born before 1980)- //www.facebook.com/DanielDiPiazzaPage/Work with me one-on-one- //www.alphamentorship.com/applyGet my bestselling book, Rich20Something- //amzn.to/2rWePae v_url: //youtu.be/sAlWDSrwqyo i_thumbnail: //i.ytimg.com/vi/sAlWDSrwqyo/default.jpg i_thumbnail_1x1: //i.ytimg.com/vi/sAlWDSrwqyo/default.jpg i_thumbnail_4x3: //i.ytimg.com/vi/sAlWDSrwqyo/mqdefault.jpg i_thumbnail_16x9: //i.ytimg.com/vi/sAlWDSrwqyo/sddefault.jpg v_upload_date: 7-13-2018 v_length_minutes: 15 v_length_seconds: 35 v_view_count: 29880 callout_text: - t_title: Remember- t_text: Customer acquisition costs are an important business metric that all marketing team professionals should be familiar with. - t_headline: What is Customer Lifetime Value? t_text: Customer lifetime value, commonly abbreviated as LTV, and customer acquisition costs are not the same metrics. Unfortunately, many business professionals do not understand the difference between lifetime value and customer acquisition costs. Customer lifetime value is the total sales expected over the entire time period a customer engages with a business. When businesses calculate customer lifetime value a 1, 3, or 5 year time period can be used.

Customer lifetime value is calculated differently for different business model types. For transactional businesses, customer lifetime value depends on repurchasing rates. For subscription businesses, customer lifetime value depends on renewal rates. p_headline_type: h3 image: i_image: what-is-customer-lifetime-value-1618544807-2056.png t_description: //pixabay.com/photos/suit-businessman-man-fashion-style-690048/ v_attribution: //pixabay.com/photos/suit-businessman-man-fashion-style-690048/ v_license: Creative Commons Zero callout_text: - t_headline: What are CAC LTV Ratios? t_text: Customer lifetime value and customer acquisition cost both supply valuable information to businesses. Used together, customer lifetime value and customer acquisition costs are even more effective. The LTV CAC ratio consists of customer lifetime value divided by customer acquisition cost. The LTV CAC ratio determines if the total sales of a new customer are worth the money spent acquiring them.

Combining customer lifetime value and customer acquisition cost also provide a more long term picture. For example, let's say customer acquisition costs for a specific marketing campaign may have initially been high. However, upon calculating LTV through analyzing total sales over a time period specified, money spent may be more justifiable. As such, customer lifetime value can increase allowable customer acquisition costs.

Allowable customer acquisition costs are higher total costs that are worth it according to customer lifetime value. For example, acquisition costs for much larger clients would be incorporated in an allowable customer acquisition cost budget. Although larger clients would have a much higher cost per customer acquired, their total sales prove the marketing spent justification.

However, it is crucial that the allowable customer acquisition cost is predefined. The sales team and marketing team must make sure to discuss allowable CAC with the finance team. There is also one more metric that can be incorporated to provide an even more comprehensive picture. Payback periods are the rate at which a business receives money from its customers. Payback periods are important to consider because they allow businesses to scale and grow. Not only do payback periods encourage growth but they also streamline it. p_headline_type: h3 image: i_image: t_description: v_attribution: v_license: Creative Commons Zero video: v_video: wMLMig8tSd0 v_video_language: default t_name: Calculating Your LTV-CAC Ratio (And Why It's Such an Important SaaS Metric for Startup Success) t_description: Calculating Your LTV-CAC Ratio |When you're building and scaling a SaaS business, there are tons of SaaS metrics to keep track of. It can be overwhelming, to say the least. In this video, I'm breaking down my favorite SaaS metric that's also one of the most important metrics to focus on - the LTV CAC ratio. You'll learn exactly what it entails, how to calculate it, and the one thing you can do to optimize it. ~~~~FREE 45-MINUTE Training on How to Create an Unstoppable Sales & Marketing Machine for Your SaaS Business //tkkader.com/yt/saas-gtm-training~~~~JOIN THE UNSTOPPABLE LEGION, SUBSCRIBE TO MY CHANNEL //www.youtube.com/channel/UCUseoG3kofRLS6WoUaL_15w?sub_confirmation=1^^ I drop an episode EVERY Wednesday and Sunday to help Startup Founders, like you, become Unstoppable in your life and business.Share this video with a friend- //youtu.be/wMLMig8tSd0~~~~PLAYLISTS TO WATCH NEXT1) SCALE AND GROW YOUR SAAS STARTUP WITH AN UNSTOPPABLE GTMPlaylist- Unstoppable Sales Funnel - //www.youtube.com/watch?v=Qne7Jdtr7qA&list=PLinI31g4OKHjOHHqeCASTjGRmsbxqaSn4Playlist- Startup Growth Hacking - //www.youtube.com/watch?v=L6xtqZnqRfA&list=PLinI31g4OKHiRO3KZD3BPn3DyS8MEcrvePlaylist- SaaS Startup Tips - //www.youtube.com/watch?v=98vye4o9NNk&list=PLinI31g4OKHhF3TLhNnPPshoRsYR1xVLbPlaylist- Get Your Saas Business to Product Market Fit - //www.youtube.com/watch?v=2_FS5w7LIHo&list=PLinI31g4OKHhvAUNG8FYsA-Ohwn9sys_X2) CREATE AND EXECUTE ON AN UNSTOPPABLE STRATEGY FOR YOUR STARTUPPlaylist- Startup Planning & Strategy - //www.youtube.com/watch?v=lY-1CxIz9Z4&list=PLinI31g4OKHjyRoS8QgQxasQ_NfV4tdykPlaylist- Find Investors and Raise Capital - //www.youtube.com/watch?v=Sgr9m8qxl5Q&list=PLinI31g4OKHioWXLCrtk_ASmDN4eH2kbL3) QUITTING YOUR JOB AND STARTING A SAAS BUSINESS Playlist- How to Quit Your Job & Start a SaaS Business - //www.youtube.com/watch?v=PGrxuPAObts&list=PLinI31g4OKHjJB7LMO6rVTBBQXRiE_REn Playlist- Best Jobs in Your 20s & How to Navigate a Career Change in Your 30s - //www.youtube.com/watch?v=5rxvrYaXeaY&list=PLinI31g4OKHgpB0ej8mzdWDIM4GcS7vOk4) RUN YOUR LIFE LIKE A PRO ATHLETE TO MANAGE FOR BURNOUT AND DRIVE PEAK PERFORMANCE AS A STARTUP FOUNDER Playlist- Be More Proactive in Life - //www.youtube.com/watch?v=LUE5fJwa2uk&list=PLinI31g4OKHjWdOCbdw0jwV_gO670peqA Playlist- Burnout Prevention & Recovery - //www.youtube.com/watch?v=4gViNxxnFKQ&list=PLinI31g4OKHja8K71v4p-HW15HDVN4lXN Playlist- How to Deal With Sunday Scaries - //www.youtube.com/watch?v=D-2BlejUn0g&list=PLinI31g4OKHjZYHfAqNhrRangvPpIUenS~~~~WHO IS TK? AND WHY DID HE START UNSTOPPABLE? //youtu.be/qW9u_T4zSH8^^ How I quit my finance job, built, scaled and sold a venture backed startup, and then helped sell the company that bought mine for $4.75bn. Here's my crazy founder story.~~~~Say hi on social -Like us on Facebook- //getunstoppable.com/facebookDM me on Instagram- //getunstoppable.com/instagramFollow me on Twitter- //getunstoppable.com/twitterTWEET THIS VIDEO- //ctt.ac/4baz6#tkkader #cacltv #saasmetrics v_url: //youtu.be/wMLMig8tSd0 i_thumbnail: //i.ytimg.com/vi/wMLMig8tSd0/default.jpg i_thumbnail_1x1: //i.ytimg.com/vi/wMLMig8tSd0/default.jpg i_thumbnail_4x3: //i.ytimg.com/vi/wMLMig8tSd0/mqdefault.jpg i_thumbnail_16x9: //i.ytimg.com/vi/wMLMig8tSd0/sddefault.jpg v_upload_date: 5-6-2020 v_length_minutes: 12 v_length_seconds: 22 v_view_count: 1722 callout_text: - t_title: Fact- t_text: A higher allowable customer acquisition cost is justified through a higher customer lifetime value. - t_headline: Key Takeaways for What is Customer Acquisition Cost? t_text: p_headline_type: h2 image: i_image: key-takeaways-for-what-is-customer-acquisition-cost-1618544807-9596.png t_description: //pixabay.com/photos/businessman-consulting-business-2606502/ v_attribution: //pixabay.com/photos/businessman-consulting-business-2606502/ v_license: Creative Commons Zero callout_text: event_body: json-ld_event: t_name: Employee Scheduling for Restaurant Managers t_description: Attendees will learn how create excellent schedules. The class teaches managers how to estimate the number of employees they need to staff their locations; how to accurately forecast their customer demand; how to quickly and accuaratly write and communicate schedules to employees; and how to evaluate the accuracy and optimization of their schedules to make adjustments. v_start_date: 2022-08-08 i_image: p_location_name: Altametrics Online Webinar Course p_address: webinar.hubworks.com?site=altametrics v_price: 10.00 t_offer_description: Priority Registration v_registration_url: webinar.hubworks.com?site=altametrics ---