The total cost of acquiring a new customer, including marketing and sales expenses.
Description
In the context of the Single Sign-On (SSO) Protocol industry, Customer Acquisition Cost (CAC) refers to the total expenses incurred by a company to acquire a new customer who utilizes their SSO solutions. This includes costs related to marketing campaigns, sales team salaries, software tools, and customer training. For instance, if a company spends $10,000 on marketing and sales to onboard 100 new users, their CAC would be $100 per user. Understanding CAC is crucial for businesses as it helps them assess the effectiveness of their marketing strategies and optimize their budget allocation. A lower CAC indicates a more efficient acquisition strategy, while a higher CAC may suggest the need for reevaluation of marketing tactics. Companies like Okta and Auth0, which provide SSO solutions, closely monitor their CAC to ensure they maintain profitability while growing their customer base. Investing in targeted advertising, offering free trials, and enhancing referral programs can help lower CAC and improve overall business health.
Examples
- Okta invested $500,000 in a marketing campaign targeting enterprises, acquiring 5,000 new users, resulting in a CAC of $100.
- Auth0 offered a free trial period that attracted 2,000 users with a total spend of $200,000, leading to a CAC of $100.
Additional Information
- A low CAC can enhance customer lifetime value (CLV), leading to higher profits in the long term.
- Benchmarking against industry averages helps businesses identify areas for improvement in their acquisition strategies.