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Customer Acquisition Cost


Customer Acquisition Cost (CAC) is the price you pay on an average for Conversion, i.e., acquiring each customer. For example, even Google spent $14.4 billion in 2015 to acquire Paid or Acquired Traffic.

Why it matters:

How to calculate CAC?

Establishing exact causality is very hard. To calculate CAC, total your entire marketing cost and divide it by the number of customers.

  • It is extremely easy to calculate the cost of Digital Advertisements or Paid or Acquired Traffic. It is calculated in the form of CPM, CPL, etc.
  • Calculate the cost of Referral Traffic by determining amount spent on PR, etc.
  • Calculate the cost of content marketing by determining the cost of creating Candid Communication and the cost of running your Owned Media.
  • Do you provide Discounts and Promotions? Then include those too.
  • If you distribute a physical product then include the cost of your distribution partners (wholesales and retailers) and the cost of repurchasing unsold inventory.
  • If you have a money-back policy, then include the rate of return too. Alternatively, do not classify customers as acquired till they qualify for money-back.
  • If you have a sales team, then include the cost of the sales team and sales commissions.

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