Which metric measures the cost to acquire a customer?

Which metric measures the cost to acquire a customer?

• A. Return on Investment (ROI).
• B. Lifetime Value (LTV).
• C. Customer Acquisition Cost (CAC).
• D. Engagement rate.

Answer: (C)

The main idea here is measuring how much it costs to bring in a new customer. The metric that captures this is Customer Acquisition Cost. It tells you how much you’re spending, on average, to convert a prospect into a customer—usually computed as total marketing and sales expenses in a period divided by the number of new customers gained in that same period. For example, if you spend $5,000 and gain 100 new customers, your CAC is $50 per customer. This metric helps you gauge the efficiency of your acquisition efforts and compare costs to the value a customer brings over their lifetime. The other metrics don’t focus on cost to acquire. Return on Investment looks at profitability relative to spending, not just the acquisition expense. Lifetime Value estimates how much revenue a customer will generate over their relationship, not the upfront cost to obtain them. Engagement rate measures how actively people interact with content, not the cost of acquiring them.

The main idea here is measuring how much it costs to bring in a new customer. The metric that captures this is Customer Acquisition Cost. It tells you how much you’re spending, on average, to convert a prospect into a customer—usually computed as total marketing and sales expenses in a period divided by the number of new customers gained in that same period. For example, if you spend $5,000 and gain 100 new customers, your CAC is $50 per customer. This metric helps you gauge the efficiency of your acquisition efforts and compare costs to the value a customer brings over their lifetime.

The other metrics don’t focus on cost to acquire. Return on Investment looks at profitability relative to spending, not just the acquisition expense. Lifetime Value estimates how much revenue a customer will generate over their relationship, not the upfront cost to obtain them. Engagement rate measures how actively people interact with content, not the cost of acquiring them.