Customer Acquisition Cost (CAC): The total expense incurred by a business to acquire a new customer. It is a critical metric used to evaluate the cost-effectiveness of marketing campaigns and sales strategies.
Calculation: CAC is calculated by dividing the total costs associated with acquisition (such as marketing expenses, sales team salaries, and advertising costs) by the number of new customers gained during a specific period. The formula is: CAC = (Total Acquisition Costs) / (Number of New Customers).
Importance: Understanding CAC helps businesses assess the efficiency of their marketing efforts and make informed decisions about budget allocations. A lower CAC indicates a more efficient acquisition process, while a higher CAC may suggest the need for optimization in marketing strategies.
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