Published: May 2025

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What is Customer Acquisition Cost (CAC)?

Customer Acquisition Cost (CAC) is the total expense your business incurs to acquire a single new customer. For Australian businesses, understanding CAC is crucial for sustainable growth, especially with the competitive digital landscape and increasing advertising costs across platforms like Google Ads, Facebook, and LinkedIn.

Recent data from the Australian Bureau of Statistics shows that Australian businesses spend an average of 7.2% of their revenue on marketing activities, making CAC optimisation essential for profitability.

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Why CAC Matters for Australian Businesses

The Australian market presents unique challenges. With a population of 26 million spread across vast distances, customer acquisition strategies must be both targeted and cost-effective. Businesses that don't track CAC often discover they're spending more to acquire customers than those customers will ever generate in revenue.

Consider this: if your average customer lifetime value is $1,000 but your CAC is $800, you're only generating $200 in profit per customer before operational costs. This leaves little room for business growth or unexpected expenses.

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The Complete CAC Formula

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Basic CAC Formula:

CAC = Total Acquisition Costs ÷ Number of New Customers Acquired

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Comprehensive CAC Formula:

CAC = (Marketing Spend + Sales Team Costs + Marketing Tools + Allocated Overheads) ÷ Number of New Customers

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Breaking Down CAC by Channel

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1. Digital Marketing Channels

Google Ads CAC Calculation:

• Ad spend: Include all Google Ads costs
• Management fees: Agency fees or internal staff costs
• Landing page costs: Development and maintenance
• Analytics tools: Google Analytics 4, conversion tracking tools

Social Media CAC Calculation:

• Advertising spend: Facebook, Instagram, LinkedIn, TikTok
• Content creation costs: Graphics, video production, copywriting
• Management tools: Hootsuite, Buffer, Sprout Social
• Community management: Staff time for engagement and responses

Email Marketing CAC:

• Platform costs: Mailchimp, Constant Contact, Campaign Monitor
• Design and development: Template creation, automation setup
• List building costs: Lead magnets, opt-in incentives
• Staff time: Campaign creation and management

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2. Traditional Marketing Channels

Radio/TV Advertising:

• Media buy costs
• Production expenses
• Talent fees
• Distribution costs

Print Advertising:

• Publication costs
• Design and layout
• Photography
• Distribution (for direct mail)

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3. Sales Team Costs

Direct Sales CAC:

• Salaries and commissions
• Training and development
• CRM software costs
• Travel and entertainment expenses
• Office space allocation

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Allocating Business Overheads to CAC

Many Australian businesses underestimate their true CAC by failing to allocate relevant overhead costs. Here's what to include:

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Essential Overhead Allocations:

• Marketing team salaries: 100% allocation
• Sales team salaries: 100% allocation
• Office rent: Percentage based on marketing/sales team size
• Utilities: Proportional allocation
• Software subscriptions: CRM, marketing automation, analytics tools
• Legal and compliance: Contract reviews, advertising compliance
• Equipment costs: Computers, phones, cameras for content creation

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Allocation Method:

Overhead Allocation = (Marketing + Sales Team Size ÷ Total Employees) × Total Overhead Costs

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Worked Example 1: Melbourne Café Chain

Business: Local café chain with 3 locations in Melbourne

‍Period: Q1 2025 (January - March)

‍New customers acquired: 240

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Marketing Costs Breakdown:

• Google Ads: $3,600
• Facebook/Instagram Ads: $2,400
• Local newspaper ads: $1,200
• Flyer distribution: $800
• Staff time (marketing): $4,500 (15 hours/week × $20/hour × 12 weeks)

Sales Costs:

• Sales staff salaries (allocated): $6,000
• Training new staff: $500
• Point-of-sale system: $300

Overhead Allocation:

• Rent (20% allocation): $3,000
• Utilities (20% allocation): $400
• Software subscriptions: $450
• Equipment depreciation: $200

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Total Acquisition Costs:

$3,600 + $2,400 + $1,200 + $800 + $4,500 + $6,000 + $500 + $300 + $3,000 + $400 + $450 + $200 = $23,350

CAC Calculation:

CAC = $23,350 ÷ 240 customers = $97.29 per customer

Channel Breakdown:

• Google Ads CAC: $3,600 ÷ 96 customers = $37.50
• Social Media CAC: $2,400 ÷ 84 customers = $28.57
• Traditional Advertising CAC: $2,000 ÷ 60 customers = $33.33

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Worked Example 2: Brisbane B2B Software Company

Business: SaaS company providing inventory management software

‍Period: Q4 2024 (October - December)

‍New customers acquired: 45

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Marketing Costs Breakdown:

• LinkedIn Ads: $8,500
• Google Ads: $12,000
• Content marketing: $6,000
• Webinar platform: $500
• Email marketing tools: $300
• SEO tools: $600

Sales Costs:

• Sales team salaries (2 reps): $36,000
• CRM software: $900
• Sales tools and subscriptions: $1,200
• Travel and client meetings: $2,500

Overhead Allocation:

• Office rent (40% allocation): $4,800
• Utilities (40% allocation): $600
• Legal and compliance: $1,500
• Equipment and software: $2,000

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Total Acquisition Costs:

$8,500 + $12,000 + $6,000 + $500 + $300 + $600 + $36,000 + $900 + $1,200 + $2,500 + $4,800 + $600 + $1,500 + $2,000 = $77,400

CAC Calculation:

CAC = $77,400 ÷ 45 customers = $1,720 per customer

Channel Performance:

• LinkedIn Ads: $8,500 ÷ 15 customers = $566.67
• Google Ads: $12,000 ÷ 20 customers = $600.00
• Content Marketing: $6,000 ÷ 10 customers = $600.00

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Industry Benchmarks for Australian Businesses

Based on 2024 data from Australian marketing agencies and industry reports:

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B2C Industries:

• Retail/E-commerce: $25-$85 CAC
• Food & Beverage: $35-$120 CAC
• Travel & Tourism: $45-$200 CAC
• Financial Services: $150-$400 CAC

B2B Industries:

• Software/SaaS: $800-$2,500 CAC
• Professional Services: $300-$1,200 CAC
• Manufacturing: $500-$1,800 CAC
• Consulting: $400-$1,500 CAC

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CAC to Customer Lifetime Value (CLV) Ratio

The CAC:CLV ratio is crucial for sustainable business growth. Australian businesses should aim for:

• Excellent: 1:5 or better (CAC is 20% or less of CLV)
• Good: 1:3 to 1:4 (CAC is 25-33% of CLV)
• Acceptable: 1:2 to 1:3 (CAC is 33-50% of CLV)
• Poor: 1:1 or worse (CAC equals or exceeds CLV)

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Strategies to Reduce CAC

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1. Optimise High-Performing Channels

Focus budget on channels with lowest CAC and highest conversion rates. From our examples:

• The café's Google Ads had the lowest CAC at $37.50
• Reallocate budget from underperforming traditional advertising

2. Improve Conversion Rates

• A/B test landing pages
• Optimise checkout processes
• Implement retargeting campaigns
• Use social proof and testimonials

3. Enhance Customer Referrals

Referral programs can reduce CAC by 30-50%. Australian businesses report referral CACs of $15-$85 compared to paid advertising CACs of $50-$300.

4. Content Marketing Investment

While content marketing has higher upfront costs, it typically reduces CAC over time as organic traffic increases.

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Common CAC Calculation Mistakes

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1. Ignoring Customer Lifetime

Don't just focus on immediate CAC. Consider the payback period and ensure CLV justifies acquisition costs.

2. Inconsistent Time Periods

Use consistent measurement periods. A customer acquired in December might not convert until January.

3. Excluding Overhead Costs

Failing to allocate relevant business overheads leads to artificially low CAC figures.

4. Not Segmenting by Channel

Different channels have vastly different CACs. Aggregate reporting masks inefficient spending.

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Monthly CAC Tracking Template

Track these metrics monthly:

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Tools for CAC Calculation

Free Tools:

• Google Analytics 4: Track conversion paths and attribution
• Facebook Ads Manager: Built-in CAC reporting
• Google Ads: Cost-per-acquisition tracking

Paid Tools:

• HubSpot: Comprehensive CAC tracking and reporting
• Salesforce: Advanced attribution modelling
• Mixpanel: Customer journey analytics

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Taking Action on Your CAC

Understanding your CAC is just the beginning. Australian businesses that actively optimise their customer acquisition typically see:

• 25-40% reduction in CAC within 6 months
• 15-30% improvement in marketing ROI
• Better budget allocation decisions
• Improved cash flow predictability

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Start by calculating your current CAC using the formulas and examples provided. Then, identify your highest-performing channels and optimise your marketing spend accordingly.

Remember, the goal isn't necessarily the lowest CAC, but the most profitable customer acquisition strategy that supports sustainable business growth.

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