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Customer Acquisition Cost (CAC)

What is Customer Acquisition Cost (CAC)?

Customer acquisition cost (CAC) measures the cost associated with acquiring a new customer. This metric includes all marketing, sales and other related expenses divided by the number of new customers acquired during a specific period. Understanding CAC is essential for businesses to evaluate the effectiveness of their marketing strategies and the overall efficiency of their customer acquisition efforts.

A lower CAC indicates that a company is acquiring customers more cost-effectively, which is crucial for long-term profitability. Companies often strive to reduce CAC while increasing customer lifetime value (CLV) to maximize returns on investment. By analyzing CAC alongside other metrics, businesses can make informed decisions about budget allocation, marketing channels and sales strategies.

Related terms

EBITDA
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Financial Reconciliation
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Forecast Variance
Forecast variance is the difference between a predicted result and the actual outcome over a given period for a variety of business activities.