The Cost of Acquiring a customer
A new customer does not come at zero cost.
Businesses may spend money and resources on:
Advertising
Social media marketing
Sales teams
Promotions
Website and digital platforms
Customer research
Sales meetings and follow-ups
Staff time and operational resources
These costs contribute to the amount a business spends to acquire new customers.
This is where Customer Acquisition Cost (CAC) becomes important.
Simple Formula:
CAC = Total Sales & Marketing Costs ÷ Number of New Customers Acquired
Example
If a business spends ₦500,000 on sales and marketing and acquires 100 new customers:
CAC = ₦500,000 ÷ 100 = ₦5,000
The business therefore spends an average of ₦5,000 to acquire each new customer.
But CAC should not be viewed alone.
Businesses should also consider how much revenue and profit a customer generates over time. A customer who costs ₦5,000 to acquire may be valuable if they generate significantly more than that through repeat purchases and long-term relationships.
Growing your customer base is important, but profitable growth matters more than growth alone.
Know what it costs to acquire a customer, and whether the customer relationship generates enough value to justify that cost.
At 2GDB Consulting, we simplify tax, finance, and business insights, helping individuals and organizations grow smarter.
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