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Lesson 8: Estimating Customer Acquisition Cost (CAC)

· 2 min read
Max Kaido
Max Kaido
Architect

Lesson 8: Estimating Customer Acquisition Cost (CAC)​

Objective​

To estimate the Customer Acquisition Cost (CAC) for your product or service by identifying:

  • A core unit and its average value.
  • A primary customer segment to target.
  • A main sales channel for reaching this segment.
  • The conversion rates and costs at each stage of your sales funnel.

Steps to Calculate CAC​

  1. Select Key Elements

    • Main Unit: Choose the product or service offering that drives the most value (e.g., a completed transaction, a signed subscription).
      • Example: "A single course enrollment, 10,000 rubles per course."
    • Primary Customer Segment: Define the customer group most likely to purchase this unit.
      • Example: "Freelancers aged 25–35, seeking online skill development."
    • Main Sales Channel: Identify the most effective and scalable channel for reaching your target audience.
      • Example: Paid ads on Instagram targeting specific keywords.

  2. Build the Sales Funnel

    • Define the key stages of your sales process (e.g., impressions → clicks → leads → sales).
    • Use industry averages or reasonable assumptions for:
      • Conversion rates between stages.
      • Costs associated with each stage.

Example Funnel for Instagram Ads:

  1. Impressions: The number of times your ad is seen.
  2. Clicks: The number of people who click on the ad.
  3. Leads: Users who sign up for a free trial or submit their contact information.
  4. Sales: Users who complete the purchase.

Estimating Costs and Conversions​

  • Use tools like Facebook Ads Manager, Google Ads, or online research to estimate ad costs and typical conversion rates.
  • Include fixed costs (e.g., salaries for sales staff) and variable costs (e.g., ad spend, bonuses).

Example Calculation:

  • Ad Spend:

    • Cost per 1,000 impressions (CPM): 200 rubles.
    • Click-through rate (CTR): 2%.
    • Cost per click (CPC): 10 rubles.

  • Conversion Rates:

    • Clicks to Leads: 20%.
    • Leads to Sales: 10%.

  • Sales Staff Costs:

    • Base salary + bonuses = 5,000 rubles per sale.

Calculating CAC​

Use the formula: CAC = Total Cost of Acquiring Customers ÷ Number of Customers Acquired

Example:

  • Total Costs:
    • Ad spend: 1,000 clicks × 10 rubles = 10,000 rubles.
    • Sales staff: 5 sales × 5,000 rubles = 25,000 rubles.
    • Total: 35,000 rubles.
  • Customers Acquired: 5.
  • CAC: 35,000 ÷ 5 = 7,000 rubles per customer.

Documentation Format​

  1. Sales Funnel Structure

    • Funnel stages
    • Conversion rates
    • Costs at each stage
    • Total costs and customers acquired

  2. CAC Calculation

    • Show your work using the formula above
    • Include all relevant costs
    • Document assumptions made

Tips for Accuracy​

  • Use approximate data from reliable sources (e.g., Google Ads or social media platforms)
  • Simplify where necessary—focus on the big picture rather than perfect accuracy
  • Document your assumptions for future refinement

Let me know if you'd like help with creating the funnel diagram or estimating conversions!