CAC Payback: How to Calculate & Why It's Important | Jirav
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What is CAC Payback?
CAC Payback is a metric that measures the time taken by a company to recover the cost incurred to acquire a new customer through sales and marketing efforts. It shows how quickly a company can generate revenue from its investment in customer acquisition and helps evaluate the efficiency of the acquisition process.
Why CAC Payback Is Important
CAC Payback helps companies understand the return on investment (ROI) from their sales and marketing efforts. It helps companies determine if their acquisition strategies are working, and if they are not, they can identify areas that need improvement. The metric also helps companies make informed decisions about how much they can afford to spend on customer acquisition and remain profitable.
How to Calculate CAC Payback
CAC Payback is calculated by dividing the total cost of customer acquisition by the average revenue generated by a customer over a given period. The formula is as follows:
CAC Payback = Total Cost of Customer Acquisition / Average Revenue per Customer
It’s important to note that the average revenue per customer should be calculated over a period that is long enough to provide an accurate representation of the customer lifetime value.
