What is Customer Acquisition Cost (CAC)?

Customer acquisition cost (CAC) is a measure of how efficient a company's sales and marketing efforts are at acquiring new customers. Customer acquisition cost is calculated by adding the organization's sales and marketing costs, including salaries, commissions, ad purchases, and more, and dividing the result by the number of new customers for a given time period.

Every business and industry will have its own definition of what is a "good" customer acquisition cost. For example, companies that produce high-priced goods may have a higher acceptable CAC threshold than those who sell cheaper products. Regardless of the target, businesses typically try to reduce their customer acquisition cost because it leads to higher profitability.

Many organizations try to measure customer acquisition cost by sales or marketing channel. For example, they might try to measure CAC for television ads, social media ads, and telemarketing. This can be fairly straightforward for internet ads, where organizations can track where purchasers originated, but is not so straightforward for offline advertising such as billboard campaigns. Knowing customer acquisition cost by channel helps businesses make better decisions about where to spend their marketing dollars.

How contact centers impact customer acquisition cost

Contact centers that provide sales support can play an important role in the customer acquisition cost calculation. Outbound call centers often make calls to leads in an effort to convert them to customers. Additionally, inbound sales agents are tasked with turning prospects into paying customers. When contact centers perform well and conversion rates increase, customer acquisition cost decreases.

Contact centers also have a pivotal role in influencing a close cousin of customer acquisition cost - customer lifetime value (CLV). CLV measures the value of a customer for the duration of their relationship with a business. Since acquiring a new customer is 5 to 25 times more expensive than retaining one, it's important that businesses keep customers and maximize the revenue from each relationship. Contact centers that deliver exceptional customer experiences can help increase customer retention and share of wallet.