What Is Customer Acquisition Cost (CAC)?
In business, customer acquisition cost (CAC) refers to the total expense incurred to acquire a new customer through customer service and sales interactions. It includes costs such as marketing, advertising, agent salaries, and technology infrastructure. Managing CAC is essential for businesses to maintain profitability and optimize customer acquisition strategies.
Impact of Customer Acquisition Cost
There are numerous impacts on the business from customer acquisition costs, especially if the CAC is high:
- Can reduce the business’s overall profitability
- May require reallocating budget which can effect other operations
- Might hinder the ability to scale
- Often increases pricing, making it harder to compete
- Requires a focus on maximizing customer lifetime value to offset high CAC
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