What is Customer acquisition cost?

What is Customer acquisition cost (CAC)?

Customer acquisition cost, CAC, is the total cost of winning a customer: add a period's marketing and sales spend, including ads, tools, salaries and commissions, and divide by the new customers gained. An honest CAC includes the costs people forget, the owner's selling hours and the agency retainer, not just the ad receipts.

CAC only means something beside two other numbers: lifetime value, which sets what a customer is worth, and payback period, how long until the customer's margin covers the CAC. A 50,000 naira CAC is reckless for a one-off 30,000 naira sale and trivial for a client worth 2 million over three years.

Why it matters

CAC is the number that kills or scales a business. When it rises above what a customer is worth, growth loses money faster the harder you push; when it is comfortably below, the constraint shifts to how much you can spend. Tracking it per channel shows that some sources produce cheap customers who stay and others produce expensive customers who churn.

How it works in Medivot

Because Medivot records each lead's source and UTM values on the CRM record and follows it through to won deals, you can compare channels on customers produced rather than clicks delivered, the honest numerator for CAC. Consolidating CRM, email, landing pages, booking and webinars into one naira-billed platform also removes several tool subscriptions from the cost side of the equation; see pricing.

Related terms

• Customer lifetime value (CLV): The total revenue you can reasonably expect from one customer over the whole relationship, used to decide what you can afford to spend winning them.
• Churn rate: The percentage of customers or subscribers who leave in a period: the leak in the bucket that decides how fast you must refill it.
• Lead generation: Everything you do to attract strangers and convert them into leads: content, offers, forms, webinars, outreach and referrals that produce people you can follow up with.
• UTM parameters: Short tags added to a link, like ?utm_source=instagram, that tell your analytics exactly which campaign, channel and post each visitor came from.