All language subtitles for 12 - L1 13 Customer Acquistion Cost V2 - lang_en

Customer Acquisition Cost or CAC is used as a metric in the very last step in our funnel,

where the customer has actually bought a product or service on the website.

We use the CAC metric to figure out how much it costs to acquire a paid customer.

Remember, our ultimate goal is to increase these conversions at the bottom of the funnel.

Considering e-commerce shopping cart abandonment rates are well over 60 percent,

each company's goal is to make sure you're getting

higher levels of conversions for the minimum cost of sales in marketing.

This idea is linked to the concept of optimizing the funnel.

We will cover this later in the lesson.

CAC is computed by dividing all the costs

spent on acquiring more customers, marketing expenses,

sales and marketing salaries,

by the number of customers converted to paid customers in the period the money was spent.

A good rule of thumb is that you want your CAC to be 25 percent of the revenue,

the money you earn from all your customers.

Next, you'll perform a sample computation of CAC.