As the name suggests, the customer acquisition cost is the amount of money spent by any enterprise when gaining a new customer. This amount is calculated based on the effort and resources spent on acquiring the customer. It is measured, so the business can keep a track of the return on this investment as their customer base grows.
Customer Acquisition Cost includes all the verticals that work in cohesion to acquire a customer. It includes the budget of marketing, sales, PR, and more. According to popular studies, it is five times costlier to acquire a new customer than to retain one. Hence, it is advised to nurture your customers to the best of your capacity to reserve your resources.
At first, you understand your customer acquisition roadmap. It includes your marketing, advertising, and sales team. Once you figure out all the resources factoring in this process, you calculate the revenue invested in it. Then you divide that amount by the number of customers acquired. For example, if my team is spending $1000 a quarter for which we acquired 250 customers. That means the customer acquisition cost is $4. Now you evaluate, how fair this amount is based on time, effort and development as well.