Updated: Monday, November 30th 2020, 9:13:22 am
These two words CPA & CAC are becoming ever so important in the business world. Even though these words originated in the the startup world but now the business world has embraced them full.
CPA : Cost Per Acquisition
CAC : Customer Acquisition Cost
So in short, Cost for acquiring a customer or cost of convincing a customer to buy a product.
Basically, the CAC can be calculated by simply dividing all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent. For example, if a company spent $100 on marketing in a year and acquired 100 customers in the same year, their CAC is $1.00.
Knowing how much you can spend to acquire a customer is highly valuable. This gives you an ability to maximise your growth potential while keeping a close eye on profitability.
Let’s address a common myth. Customer acquisition cost (CAC) and cost per acquisition (CPA) are commonly conflated, and yet in reality they’re completely different metrics. Understanding the difference is the start to understanding CAC in depth.
CAC specifically measures the cost to acquire a customer. Conversely, CPA (Cost Per Acquisition) measures the cost to acquire something that is not a customer — for example, a registration, activated user, trial, or a lead. The two are related because CPA is usually used to measure the cost of things that are leading indicators to CAC.
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