How to Calculate (and Improve) Your Customer Acquisition Costs

Calculating your CAC involves taking all of your company's marketing and purchasing expenditures and dividing them by the number of new clients you get from that expenditure.

To help break it down, we’ll offer the example below.

The formula for the CAC calculation is:

CAC = (total cost of sales and marketing) / (number of customers acquired)

So, if you spend $36,000 on a Facebook campaign to acquire 1,000 customers, your CAC is $36.

CAC = $36,000 / 1000 = $36

Customer acquisition costs are a clear indicator of your company's future performance. For example, did you know that the cost of gaining consumers has risen by 60% in the previous six years? This metric will become increasingly important as time passes and you start adding up the months it takes to recoup those costs and generate a profit.

However, you’re in luck! The infographic below from GetVoIP reveals five different ways to enhance your CAC today.

For example, implementing a retargeting strategy can help improve customer conversion rates by generating highly targeted campaigns for prospective customers.

Another example is to create an affiliate program such as Amazon's 900,000+ army of affiliates that drive massive traffic to the website and earns hundreds of thousands of dollars. Set up a commission structure that makes sense for your business and reward affiliates who bring you the most traffic.

Understanding how to determine your client acquisition cost is extremely useful for any company to maximize its resources and extend its budget. You can find further recommendations in the visual below.