Customer Acquisition Cost Calculator

Customer Acquisition Cost Calculator

Customer acquisition cost is a crucial metric to monitor. It is simpler to assess the success of your entire customer acquisition plan, compare different acquisition strategies, and guarantee long-term profitability when you calculate your customer acquisition costs.

 

With the help of this free Excel calculator, you can streamline the procedure and simply calculate and monitor crucial customer acquisition metrics including Customer Acquisition Cost (CAC), Customer Lifetime Value (CLTV), and CLTV to CAC Ratio.

 

We hope to assist you in determining the cost necessary to acquire a customer by providing you with our customer acquisition cost calculator (or CAC calculator). You may evaluate the effectiveness of your company’s client acquisition strategy by computing the cost of customer acquisition.

CAC Calculator
What Does the Term “Cost of Acquisition” Mean?

Every customer you are able to persuade to buy your goods or pay for a membership typically incurs a cost before they become a customer. This is the price you pay to bring in new consumers or your customer acquisition cost.

 

Advertising, salaries, commissions, bonuses, and other marketing costs primarily related to sales are included in the price to acquire these new clients.

 

There is greater room for profit the lower the cost of acquiring new clients.

CAC Calculator
CAC Calculator
Why Should You Track and Evaluate Your Customer Acquisition Cost?

You can make crucial financial decisions for the future of your company by being aware of the cost of acquiring a new client.

 

Every firm is aware that a product cannot be viable if it is not profitable. A crucial statistic to establish whether a certain product is lucrative for your company is the calculation and monitoring of client acquisition costs.

 

It can, however, also reveal whether you’re overspending to bring in new clients. In certain circumstances, it has little to do with the product itself, but rather with the marketing strategy.

 

What Does The Customer Acquisition Cost?

The sum of money required to attract a single customer is known as the customer acquisition cost or CAC. In general, the cost associated with providing the service or product—that is, the cost of sales and marketing—is what it takes for a business to serve a consumer. The firm is less efficient the higher the cost of acquiring a customer.

CAC Calculator
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How is CAC Determined?

The Formula For Customer Acquisition Costs

Let’s examine the company Alpha using the details below to better understand the CAC calculation:

 

$1,000 was spent on marketing; 

$12,000 was spent on sales; 

1,000 new clients were acquired.

 

To determine the cost of acquiring a customer, follow these four steps:


1. Calculate the expense of marketing.

The first step is to determine the cost of marketing. In this example, the cost of marketing is $1,000.

 

To understand more about marketing, please check out our online marketing conversion calculator.


2. Evaluate the cost of sales

Next, you need to compute the cost of sales. This is the cost required to deliver the service or products. The cost of sales for Alpha is $12,000.


3. Determine the number of new customers.

The number of new clients obtained throughout the time period must then be determined. There are 1,000 new clients in this scenario.


4. Determine the cost of acquiring a new customer.

The last step is to calculate the CAC using the customer acquisition cost formula below:

 

CAC = (cost of marketing + cost of sales) / number of new customers

 

For Alpha, the CAC is ($1,000 + $12,000) / 1,000 = $13.

What is The CAC (Client Acquisition Cost) Process?

An examination of some of the underlying ideas behind CAC, CLV, LTV, and all the other acronyms…

 

Everyone may agree that there are numerous criteria to evaluate the performance of ANY organization.

 

But listen, one of the most important metrics out there is client acquisition cost (from here, “CAC,” because let’s face it, it’s a mouthful…”).

 

Here’s the conclusion:

 

If you don’t comprehend it, your company will fail.

 

Take hold of it and use it… And you’ll be moving quickly toward success.

 

You can use the CAC calculator above to create a general estimate for your company.

CAC Calculator
CAC Calculator
What Makes CAC Important?

You must market your product if you have one.

 

Getting customers is necessary, and you will typically have to pay to do it.

 

This compensation might come in many different forms, such as Facebook advertising, Google AdWords ad purchases, mailing leaflets to people’s letterboxes, or trying to sign them up while standing on a street corner.

 

Any option you choose will cost money (yes, even the last one because it takes time!).

 

At its most fundamental, your CAC is the amount you’ll be required to pay. Invest $100 in Facebook to attract your first client. You have a $100 CAC. If you spend $100 on PPC and $50 on sent brochures, how many clients do you get in return? Your CAC is $75 ($150 divided by two clients).

Calculating Channel-specific CAC

You may determine which marketing channel is more profitable for you by segmenting your CAC across various marketing channels.

 

These advertising platforms include: 

 

– Facebook and Instagram Ads

– Google AdWords

– Ads on display (such as Google Display Network)

– Affiliate Marketing – New platforms for advertising, such as TikTok – Unpaid marketing avenues, like blogs (content marketing) and SEO (SEO)

 

Simply divide the marketing spend allocated to that channel by the number of consumers (conversions) the channel is responsible for to determine the channel-specific CAC.

 

When you know the CAC for each marketing channel, you may rank and prioritize them and choose which one should receive a larger share of your marketing budget.

 

On platforms like Google Ads, you could have scale restrictions because the term quantities relating to your offering often limit your reach.

 

However, because you can target clients based on many demographic characteristics, platforms like Facebook theoretically offer a nearly limitless reach. The options are essentially limitless.

 

If there are no new customers, what is the cost of client acquisition?

The price to get a consumer will be (infinite!). This is so that you don’t incur any customer acquisition costs while paying marketing and sales expenses.

CAC Calculator