What is Customer Acquisition Cost (CAC), and how do you calculate it?
In short – Average cost incurred to acquire a new customer. A key marketplace metrics you should track.
Customer Acquisition Cost (CAC) Formula
CAC = Total Marketing & Sales Expenses ÷ Number of New Customers Acquired
Customer Acquisition Cost (CAC) represents the total marketing and sales expenses required to acquire a new customer. It is critical for assessing the efficiency of customer acquisition strategies.
Lowering CAC while maintaining or increasing customer quality leads to better profitability. Understanding CAC helps in budgeting and optimizing marketing channels. This metric helps businesses understand key operational efficiencies, areas for improvement, and strategic opportunities to drive growth and user engagement.
How can you find your Customer Acquisition Cost (CAC)?
You should generally be able to calculate your Customer Acquisition Cost (CAC) with tools you already posess. If that's not the case, signing up for an analytics tool may make sense.
Among others, twosided is one of the tools you could consider. Out-of-the-box, you'll get over two dozens marketplace KPIs and detailed tracking for your supply, demand and other factors that determine marketplace health.
Explore other metrics
Net Promoter Score (NPS)
A measure of customer loyalty and satisfaction based on user feedback.
Average Order Value (AOV)
The average value of orders placed on the platform.
Supplier Lifetime Value (SLV)
The projected revenue generated by a supplier over their tenure on the platform.
Repeat Purchase Ratio
The proportion of customers who make repeat purchases over a given period.
Customer Lifetime Value (CLV)
The projected revenue a customer will generate during their relationship with the business.