Which metric is used to evaluate the cost of acquiring a new customer?

The metric used to evaluate the cost of acquiring a new customer is Customer Acquisition Cost (CAC). This metric specifically calculates the total cost associated with acquiring a new customer. It encompasses all marketing and sales expenses incurred in attracting and converting prospects into paying customers. By dividing the total costs spent on acquiring new customers by the number of new customers acquired in a specific period, businesses can determine the average cost to bring in each new customer.

Understanding CAC is crucial for businesses as it helps assess the effectiveness of marketing strategies and can guide future investment decisions. It allows companies to evaluate whether their efforts are yielding enough return to justify the expense of acquiring customers. A healthy CAC is typically seen in relation to the Customer Lifetime Value (CLV), where a lower CAC compared to CLV indicates a potentially profitable acquisition strategy.