Customer Acquisition Cost (CAC) is the total cost a business incurs to acquire a new user for its mobile application. This cost includes all the expenses associated with marketing, advertising, promotions, and other efforts to attract users to download and use the app.
The formula for determining Customer Acquisition Cost is:
CAC = Total expenses to attract app users / Number of new users acquired
In simpler terms, it’s the total amount spent on acquiring new users divided by the number of new users gained during a specific time period.
For example, if a company was able to attract 5,000 users to its new app and had to spend a total of $100,000 on advertising, promotions, freebies, etc, then its CAC is $20 per user acquired.
The goal of any app business is to lower the CAC as much as possible by ensuring that all advertising and marketing campaigns are effective enough to reel in as many users as possible.
Customer acquisition cost must be considered alongside other metrics like conversion rates to make this measurement useful in assessing an app’s financial sustainability.
Measuring the customer acquisition cost is important for several reasons, including:
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