Customer Acquisition Cost

In a B2B market, the customer acquisition cost is the sum of what it takes to acquire a new client. Marketing efforts that might be factored into customer acquisition are touches from trade shows, advertising and email campaigns. There are two ways to look at this cost. Say for example you meet 10 new people at a trade show that cost $1,000 and they all became customers, that means the cost to acquire each new customer was $100.

While you do need metrics to measure the success of every marketing activity, that viewpoint is misleading as the potential new customer often has many marketing touches, some not quantifiable such as advertising, before they sign on the dotted line. Therefore,  common wisdom is that the best way to determine CAC is to add up all the marketing costs for the year and divide it by the number of new customers signed. While this is a good guideline, it also includes baseline marketing materials and presence, such as website and sales sheets, which are important to a company’s credibility but do not have a direct line to new customer acquisition.

Removing the above baseline items from the overall cost, will provide a CAC that is closer to the mark.