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Kavii SuriTop Contributor
GEEK | Content Writing Intern | Pursuing CS | Exploring ML and Data Science
Asked a question last year

What is customer accusation cost and how to calculate it for your startup?

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Kavii SuriTop Contributor
GEEK | Content Writing Intern | Pursuing CS | Exploring ML and Data Science

Let me first explain why i am motivated to tell this....

In the entrepreneurship summit of my college (NIT Silchar) called SRIJAN 1.0, a pitching competition was organised, my team cleared the screening but couldn't win anything. One of the reason of this was the fact that I was asked this term by the investor and I, although already knowing the calculated value, couldn't answer because of the unknown term and how heavy it sounded......

 

CAC or Customer Accusation Cost is the cost of convincing a potential customer to buy a product or service. It is a metric that has been growing in use, along with the emergence of Internet companies and web-based advertising campaigns that can be tracked.

This metric is important to two entities: companies and investors. The first one includes outside, early-stage investors who use it to analyze the scalability of new Internet technology companies. They can determine a company’s profitability by looking at the difference between how much money can be acquired from customers and the costs of getting it. Investors also view this the same way, they generally value the current metrics instead of promises of improving the future.

The CAC can be calculated by simply dividing all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent.