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.
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
Order Frequency
Average number of orders placed by a buyer within a specific period
Cross-Sell Rate
Percentage of transactions that include additional products or services
Supply-Demand Ratio
Ratio of available listings to active buyers
Listing Quality Score
A metric evaluating the quality of product listings based on predefined criteria
User Net Adds
Net increase in the number of users over a specific period