Glossary – CAC

Why it's important to understand customer acquisition cost

CAC is the cost of convincing a prospect to buy a product or services. This metric, which has been rising in popularity over the last few years, is simple to calculate. As an example, if company X spent $1,000 on marketing, and acquired 100 customers during the measured time period, then their CAC would be $10. One downside of this metric is that because of the simplicity, it’s not a fantastic tool for diving deeply into your company’s data. If a customer that was acquired in January, also makes purchases in May, August, and November, the CAC wouldn’t reflect how valuable that customer is, and would treat them as someone who made a single purchase. This is why customer lifetime value (CLV) is important to use.

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