CAC is calculated as total marketing and sales costs divided by the number of new customers. Which option represents this formula?

CAC is calculated as total marketing and sales costs divided by the number of new customers. Which option represents this formula?

• A. Marketing expenses + Sales expenses / the number of new customers for the period
• B. Marketing expenses / the number of existing customers
• C. Sales expenses x the number of new customers for the period
• D. Marketing expenses - Sales expenses / the number of new customers for the period

Answer: (A)

CAC represents the cost to acquire a new customer, so you combine all the marketing and sales spending and spread it across the number of new customers gained. The correct approach is to add marketing expenses and sales expenses, then divide by the number of new customers for the period. The other options don’t match this idea: they either use the wrong operation (multiplication or subtraction) or the wrong denominator (existing customers instead of new ones).

CAC represents the cost to acquire a new customer, so you combine all the marketing and sales spending and spread it across the number of new customers gained. The correct approach is to add marketing expenses and sales expenses, then divide by the number of new customers for the period. The other options don’t match this idea: they either use the wrong operation (multiplication or subtraction) or the wrong denominator (existing customers instead of new ones).