Customer Acquisition Cost
Why it’s important
Customer Acquisition Cost or CAC is an essential metric for any business with a focus on customer acquisition or lead generation. A high Customer Acquisition Cost should be deemed a cause for concern whilst a low result is highly desired. By measuring how much it is costing you, on average, to acquire new customers or clients, you can see the overall efficiency of your Sales and/or Marketing processes, and use this information to make actionable decisions to optimise this figure further. If your CAC is especially bloated, one or more of your conversion funnels may be performing poorly due to inefficiencies in your process.
For example, you may be generating a significant number of leads from your marketing campaigns, however if your marketing wasn’t sufficiently targeted, then your Sales Teams may become weighed down by poorly qualified, never-going-to-convert leads. Filling their calendars full of inefficiently used time, which is being paid for regardless of whether a conversion occurs.
Alternatively, it may be the case that your marketing has been exceptional but you have the misfortune of running a Sales Team that simply can’t sell. As a result, all of your hard-won opportunities may be being converted at a low rate, despite the costs that have gone into generating them.
Through the use of one figure – Customer Acquisition Cost – you can quickly identify when there is a shortfall in one or more of these steps in your process, and then do the necessary investigations to expose and resolve the causes.