How do you calculate your customer acquisition cost?

How Do You Calculate User Acquisition Cost

In the simplest interpretation, the user acquisition cost is the ratio of the expense of user acquisition campaigns and the number of users acquired.

However, calculating User Acquisition Cost or Customer Acquisition Cost is not that simple as modern-day marketing involves a number of complexities in terms of attribution of channels, cost models, KPIs, and tools.

How To Customer Acquisition Cost (CAC)

CAC includes the expenses of acquiring the customer as well as the conversion. So, it is the sum of user acquisition cost and sales cost.

Consider the following factors while calculating the CAC:

  • Accuracy of Attributes: As different channels and mediums charge you differently, it is crucial that you calculate their contribution to your acquisition cycle individually. Along with a better understanding of the campaign performance, it gives you the scope of optimization to ensure the increase in the rate of customer acquisition and hence reducing CAC.
  • Tools Used: Marketing tools come at a cost and some of them can be hefty ones. Do not miss out on including these invoices in your campaign calculations.
  • Salary and Overhead Cost: While running user acquisition campaigns, it is easy to neglect other expenses involved in customer acquisition, such as the salary of the team, office rental, and more. Such negligence can spell doomsday for small businesses and startups with a thin budget margin.

With all these factors into consideration, the cost of customer acquisition is given as:

To read you about various customer acquisition cost models, such as Cost per Acquisition (CPA), Effective Cost per Thousand Impressions (eCPM), Cost per Click (CPC), Cost per Install (CPI), Cost per Engagement (CPE), Cost per Sale (CPS), and more, you can refer to this blog on User Acquisition Cost Model As Per Performance Indicator.

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