Customer acquisition cost

Customer Acquisition Cost (CAC) is the cost of winning a customer to purchase a product/service. As an important unit economic, customer acquisition costs are often related to customer lifetime value (CLV or LTV).

Calculating Customer Acquisition Costs

There is a simple and complex method for calculating acquisition costs.

Simple Method
The simple method divides the total marketing costs to acquire new customers by the total number of customers acquired in a defined period.


  • CAC = Customer Acquisition Cost
  • MCC = total marketing cost for acquiring customers (not regular customers)
  • CA = total customers acquired

Complex Method
In addition to the costs incurred in marketing, the complex method includes sales and marketing wages, software costs for sales and marketing, all additional professional services such as designers, consultants, etc., as well as other overhead costs.


  • CAC = Customer Acquisition Cost
  • MCC = total marketing cost for acquiring customers (not regular customers)
  • W = wages connected with sales and marketing
  • S = all the marketing and sales associated software cost (inc. E-Commerce-Platform, automated marketing, A / B-testing, analytics etc.)
  • PS = every additional professional service in marketing / sales (Designer, consultant, etc.)
  • O = other overheads associated with marketing and sales
  • CA = total customers acquired

Customer acquisition costs in relation to customer lifetime value

Customer lifetime value expresses the monetary value that a customer is worth to the company in the course of a customer relationship. If the ratio of LTV to CAC is now calculated, different values can result.

  • 1:1 The company loses money with every acquisition.
  • less than 1:1 The company gets into financial difficulties because more is paid for customers than they are worth.
  • 3:1 is a very good level because the customer relationships are solid and customers are acquired for the right price.
  • higher than 3:1 means the company has untapped growth potential to acquire customers.

Customer acquisition costs in the environment of start-ups and venture capital

In the approach and review phase of venture capital companies to start-ups, the CAC and LTV ratios are of great importance. They show venture capital firms such as Accel Partners, Bessemer Venture Partners or Matrix Partners the efficiency of the start-up business model.

gollark: <:thonk:445016973798014987>
gollark: Emoji harvesting.
gollark: <:rust_code:747529842999689298>
gollark: <:idk:792409978111131668>
gollark: https://discordapp.com/oauth2/authorize?&client_id=235088799074484224&scope=bot&permissions=0

See also

References
  • Chen, Pei-Yu (Sharon); Hitt, Lorin M. (2020-04-22), "Switching Cost and Brand Loyalty in Electronic Markets: Evidence from On-line Retail Brokers", Proceedings of International Conference on Information Systems https://www.researchgate.net/publication/221599686_Switching_Cost_and_Brand_Loyalty_in_Electronic_Markets_Evidence_from_On-line_Retail_Brokers Missing or empty |title= (help)
  • Domingos, Pedro; Richardson, Matt (2008-11-02), "Mining the Network Value of Customers", (PDF), Proceedings of the Seventh International Conference on Knowledge Discovery and Data Mining, ACM Press, pp. 57–66 http://www.cs.washington.edu/homes/pedrod/papers/kdd01a.pdf Check date values in: |year= / |date= mismatch (help); Missing or empty |title= (help)
This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.