CAC is the cost incurred to acquire a new customer. It refers to the amount of money and resources spent in convincing a potential customer to buy your product or service.
There are different types of costs associated with CAC. It includes marketing cost, advertising cost, production cost, inventory cost, technical costs, and much more.
So how to calculate CAC for your brand? Here is a short example –
Consider you run an online store and had spent $500 on advertising in a year and acquired 200 customers in the same year. So the total acquisition cost would be $2.5.
CAC is necessary for an organization because it clearly shows how much it impacts your ROI. If the acquisition cost is higher than the entire LTV, you have to make severe changes in your acquisition strategy.