CAC Calculator: Find Out How Much It Costs You to Get a Customer

CAC Calculator Total Marketing Spend (£): New Customers Acquired:

What is Marketing CAC? (Customer Acquisition Cost)

CAC is the calculation of how much in marketing spend it is to acquire one customer in a given period. It’s an average cost. In its simplest form, it is marketing spend divided by total customers. So if you spend £10,000 on marketing, and you acquire 10 customers, that is £1,000 a customer. You can take this further by adding in cost of your sales team, software, and other overheads. Marketing CAC specifically would be marketing/ad spend divided by the number of customers.

When to use CAC

Moving on from ROAS and MER, you can start recording how much it costs to generate one customer. In an ideal world, as well as optimising campaigns to bring marketing costs down like all the elements involved, like cost per lead, cost per click, cpm, and however deep the rabbit hole goes, this is your chance to get other departments to come to the party. Because, contrary to popular belief, marketing actually has some strategic importance to a business.

What’s break-even CAC?

This is a good one, it makes you have to plan for the future, and it makes it look like marketing is an actually important function of the business (not just a colouring-in department.) Using that £1,000 example – let’s say your customer spends £100 a month, you’ve got to keep that customer for 10 months.

Essentially, you need to keep the customer for 10 months to break even and beyond for profit. This is how we get into monthly recurring revenue and lifetime value, and it’s where other departments need to come in. You might have a retention team or a customer service team, or somebody looking after a loyalty app that helps with this.

Limitations of CAC

Time Lag: CAC calculation assumes that the costs (marketing/sales spend) and the customers acquired happen in the same period. In reality, a marketing campaign in January might not result in a closed deal until March or April. So measuring at 30, 60, and 90-day intervals would be beneficial.
It Ignores Customer Value: CAC is only half the picture. A low CAC is good, but only if those customers are valuable. If you spend £50 to acquire a customer who spends £40 then that’s a flaw. It must always be viewed in the context of the lifetime value of the customer.
CAC is an average. Because it’s an average, it hides the fact that customers from one channel (e.g., SEO/Organic) might be significantly cheaper than customers from another (e.g., Paid Social). If you’ve ever tracked cost per lead daily or semi-regularly, it fluctuates like the wind. Similarly, some customers might be much more valuable than others.

This is when your job starts to get real.