What does 'customer acquisition cost' refer to?

Customer acquisition cost (CAC) is defined as the total cost involved in acquiring a new customer. This metric encompasses all expenses related to attracting new clients, including marketing, sales, advertising, and any incentives or promotions that may be offered to secure a customer's business. Understanding CAC is crucial for businesses because it helps them evaluate the efficiency of their marketing strategies and the return on investment for various customer acquisition campaigns.

By clearly identifying the total cost of acquiring a customer, businesses can make informed decisions about how much to invest in marketing efforts and how to optimize their sales processes. Tracking CAC allows companies to assess their profitability and ensure that their customer acquisition efforts are sustainable in the long term.