Customer acquisition cost (CAC) is very simply the amount of money the organization spends to acquire a new customer. An organization would usually calculate this by dividing the total marketing (or promotional) spend by the number of customers acquired during this time. If you spent $30,000 on promotion and acquired 1000 customers, your CAC is $3000.
Previously, we explained how to measure customer acquisition through lead generation or conversion. This essentially was a process to measure the value of the average customer and multiply this by the number of new customers the community attracted. This assumed that there were additional customers (i.e. not people who would have become customers anyway). This distinction is important. It enables us to include the entire lifetime value of that customer.
In practice, it’s rarely this simple. In many cases, it’s hard to determine if you would have reached a customer by either method. However, for the purposes of this calculation, we’re going to take the absolutist view that every potential customer would be reached eventually, but a community might be a more cost-effective way to acquire these customers. This means we’re not measuring additional revenue generated, but costs saved compared with other methods.