Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the total money you spend on sales and marketing efforts to acquire a new customer.

Why is CAC important?

Calculating Customer Acquisition Cost(CAC) is crucial to understand how much money you are spending to acquire a new customer. CAC tells you the efficacy of different channels and help you determine which marketing channels are giving poor ROI and which ones you should be doubling down on.

How do you calculate CAC?

CAC is calculated by dividing the total cost spent on marketing and sales by the total number of customers acquired in the period of money spent.

For example,

If you spend $1200 on marketing and acquire 20 leads from a LinkedIn ads campaign, it means the customer acquisition cost in the particular channel is $60.

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Avg. Lifetime Value
Avg. Lifetime Value

Lifetime Value or Customer Lifetime Value is average deal value you are likely to earn from any customer during the time they are using your product.

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Time to Payback CAC
Time to Payback CAC

Time to Payback CAC is the number of months it takes for you to earn back the money you spent on a customer in terms of revenue.

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Conversion rate
Conversion rate

Conversion rate is the percentage of free trial users who ultimately become your paid customers.

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