Customer Acquisition Cost (CAC) can be set in relation to Lifetime Value which enables you to optimize the return on marketing and advertising investments. It can also be calculated separately for different marketing channels to compare their associated costs in order to focus on the right channels.

Calculation

CAC can be calculated by adding up all marketing and sales expenditures of a period and dividing the sum by the number of acquired customers of the period.

Note: The time until marketing and sales expenses trigger, a sale has to be taken into account. If the sales cycle is longer, it is advisable to undertake the calculation for a longer period of time e.g. a quarter or a year.

In the first quarter of 2018, a company had marketing and sales expenses of 10.000 € and acquired 400 new customers.