Customer acquisition cost (CAC) is the amount of money used to secure a new customer. Businesses that measure their CAC know exactly how much money is used whenever a new customer buys their products or services. These costs include marketing spend, research, advertising, and any other expenses that are required to close a sale.
Why is Customer Acquisition Cost Important?
Customer acquisition cost is a key metric used to manage finances, determine budgets, and calculate ROI.
It is important to understand the exact valuation of each customer so you can allocate, shift, or reduce resources to be as profitable as possible.
Calculating your CAC is as simple as taking the total costs your business spends divided by the total amount of customers. For example, if you spend $1000 a month on Facebook Ads and Google PPC campaigns then acquire 10 000 customers per year, you’re spending $1.20 per customer.
With an accurate understanding of your CAC, you can make better decisions regarding your market spend or double down and purchase more ad space for increased results.
Not sure what this means for your business? Get in touch to learn how to take your customers on a conversion focused journey — send a message.
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