What does... "CAC" actually mean?

That too! What a ...! CAC is suddenly relevant. In written form: Customer Acquisition Cost. In other words, it refers to the financial outlay required to acquire customers. Not that the term is new, but the frequency with which it is used and the many managers who ask about CAC are causing marketing departments and agencies alike to be alarmed. Now what? Why should we also divide the spend at the end of a campaign by the number of customers acquired? You might ask yourself that. But the answer is: it's justified.

Marketing often has a tough time in companies. When the going gets tough, depending on the industry, finance, IT, operations, distribution, sales and recently even HR set the pace in management. Marketing often takes a back seat with its role.

There are few marketing-driven companies in Switzerland. On is one of them and always has to make do. It's often said: "We're not On." That's true, but you could be. But it doesn't, or doesn't allow itself to become one because a) in bad times, it saves on marketing instead of investing, and b) because marketing managers flatly refuse to raise the CAC. Nobody should be surprised if the killer question "Do we really need this?" is followed by "What are our customer acquisition costs?".

When every franc counts

There are various methods for calculating the CAC value. A simple version is: CAC = total costs for marketing and sales / number of newly acquired customers. And that's where the struggle begins. What exactly was booked to which cost center? Sales and marketing are not only enemies in funny TikTok videos. There are also numerous other jokes and comics in the style of "What's the difference between marketing and sales...?" The old star among cartoonists in the business world, Scott Adams, with his character Dilbert, delivers them by the page.

The total cost of marketing and sales usually includes every franc a company spends on acquiring new customers. This includes the cost of staff in the bloated marketing departments (which usually pay higher salaries than the agencies), sales staff (who are motivated by high commissions but cannot use the marketing material), the production of marketing materials, events, exhibitions, stores, campaigns and everything else that is done to acquire customers. This is compared with the number of new customers acquired within a certain period of time. The result is then two, three or four-digit figures, depending on the situation. Once you have the cash figure in front of you, you should be allowed to ask: "Is it worth it?" And this question can be asked by everyone. Instead of grumbling "that too", please go and do the math and analyze. Otherwise, the ... will soon be on the steam.

* Benno Maggi is co-founder and CEO of Partner & Partner. He has been eavesdropping on the industry for over 30 years, discovering words and terms for us that can either be used for small talk, pomposity, excitement, playing Scrabble, or just because.

This article originally appeared on markt-kom.com - https://www.markt-kom.com/de/markom/was-bedeutet-eigentlich-cac/