Introduction to CAC

Marketing Analytics in Tableau

Maarten Van den Broeck

Senior Content Developer at DataCamp

What is CAC?

CAC = Customer Acquisition Cost

The amount of money a company needs to spend, on average, to acquire a new customer

Typically calculated by marketing departments
Includes
- Money marketing spends
- Spend from outside marketing, like salaries for a sales team and rent on stores

$CAC = \frac{\text{Total paid marketing spend}} {\text{Total number of new customers}}$

Journey - just paid search.jpeg

Journey - paid search and paid social.jpeg

Journey - paid search, social, and purchase.jpeg

B2C (Business to Consumer)

B2B (Business to Business)

¹ https://growth-division.com/growth-marketing/typical-customer-acquisition-costs/

Variety of marketing channels

Marketing Spend ~ 10% of Revenue

Some industries spend above average, others below

Industries > 10% on average:

Industries < 10% on average:

Overhead consists of costs required to launch marketing outside of the cost to run the ad itself

This includes employees who write and manage content
For most businesses, overhead costs are very small compared to the cost of running ads
- Might not be the case for a small start-up

If LTV = CAC...

$\frac{LTV}{CAC} = 1$

Average cost to acquire a customer = average revenue a customer is worth

If average customer lifetime value is 1,000 USD and customer acquisition cost is 250 USD...

$\frac{LTV}{CAC} = 4$

This tells us that every dollar we invest in acquiring a customer yields 4 USD over that customer's lifetime

Marketing Analytics in Tableau