Customer Acquisition Cost: 5 Strategies to Reduce CAC

Customer acquisition cost is a term that has been around for years, but many people still don’t know what it means. Customer acquisition cost is the amount of money spent to acquire one customer or sale. In this post we will help you understand customer acquisition costs and how to calculate them. We’ll also discuss five strategies that can help reduce customer acquisition costs for your business. Let’s begin with understanding what does CAC means?

What is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost (CAC) is the amount of money spent to acquire one customer or sale. It includes all costs related to attracting new Customers, including advertising, marketing & sales salaries, and expenses for that customer. Customer acquisition cost is also known as customer lifetime value (CLV) and customer referral value. Customer acquisition costs can be challenging to calculate because they might include varying expenses, depending on your business type. However, the general formula to calculate CAC remains the same, i.e., by dividing all the sales and marketing expenses by the number of customers acquired for a specific time period.

How to Calculate Customer Acquisition Cost

As mentioned above, customer acquisition cost can be calculated by dividing all your overall cost spent on acquiring a customer by the number of customers acquired.

Customer Acquisition Cost = Marketing Costs / The Number of Customers Acquired

You can check this simple formula to calculate your CAC in the infographics below by GetVoIP. Here you’ll get a visual insight into how you can actually calculate CAC. Of course, it might need you to put in some hard work to calculate your customer acquisition cost, but it is worth the time you spend. Once you get your CAC, you can work on some strategies to lower it to maximize your profit.

5 Strategies to Reduce Customer Acquisition Cost

1. Establish A Referral Program

Establishing a customer referral program is the best way to reduce customer acquisition costs. This strategy will help you generate leads and sales without spending much on paid advertising by motivating your customers to refer others and earn rewards for doing so. By implementing a customer referral program, you’ll not only reduce customer acquisition costs but also ensure that your current customers are happy with their purchase decision. CRP is highly effective, especially if you already have an active customer base, as it doesn’t require any additional customer acquisition costs and can be easily implemented.

2. Optimize Your Conversion Rates

Optimizing your website’s conversion rate is another way to reduce customer acquisition costs, especially if you have a popular blog or online store. Conversion rate is the percentage of people who visit your website or blog and make a purchase. E.g., if 100 visitors come to your shop, out of which 70 customers buy something, then your shop’s conversion rate will be 70%. You can work on different conversion rate optimizing techniques to improve your CR and cut your CAC.

3. Understand Customer Needs

It’s very important to understand customer needs and find out what makes them take your service or buy your product. By understanding customer needs, you can tailor marketing efforts towards their preferences and convince more customers with the right message at the right time. 

4. Know Which Customers You Want To Attract

Before you decide to target customer acquisition and introduce a new marketing campaign, it’s important to know who your customers are. If you’re targeting the wrong customer segment, it’s going to cost your business a lot of money and result in poor customer acquisition. So before spending on any new customer acquisition strategy, make sure that it is right for your customer base and will help you get the desired results without costing too much.

5. Engage Employees In Customer Retention

With customer retention, you can keep your existing customers happy and satisfied. Customer retention doesn’t just mean customer loyalty but also customer satisfaction. Since your employees are one of your first customers, you can create a good company culture, making your employees advocate for your brand. This way, engaging them in customer retention can significantly increase your CAC. In addition to all the strategies mentioned above, you can also check several proven ways to improve your customer acquisition costs in the infographics attached below. You can follow these strategies to lower your CAC and can get a significant boost in your profits.

Customer Acquisition Cost: 5 Strategies to Reduce CAC
Reuben Yonatan
Latest posts by Reuben Yonatan (see all)

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