Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the average amount of money you spend to gain a new customer through your marketing and promotional efforts. It’s essentially the price tag for adding one more person to your customer base.

Think of it this way: If you spend $3,000 on marketing this month and gain 100 new customers as a result, your CAC is $30 per customer.

Understanding your CAC is crucial because:

1. Profitability insights: If your CAC is higher than your average customer lifetime value, you’re losing money on each new customer—not a sustainable business model!
2. Marketing effectiveness: CAC helps you compare different marketing channels. Maybe Instagram ads have a CAC of $15 while direct mail has a CAC of $45—knowing this helps you allocate your budget more effectively.
3. ROI measurement: CAC provides concrete numbers to evaluate whether your marketing investments are paying off.
4. Business planning: Accurate CAC figures are essential for growth projections and funding discussions.

Let’s walk through a real-world calculation:

Imagine your neighborhood bistro spent the following on marketing last quarter:

• $2,000 on social media ads
• $1,500 on local print advertising
• $500 on a promotional event
• $1,000 on loyalty program rewards for referrals
• Total: $5,000

During this period, you identified 200 new customers.

Your CAC would be: $5,000 ÷ 200 = $25 per new customer

For restaurants, a “good” CAC varies based on your concept and average check size:

• Quick-service restaurants might aim for a CAC below $10
• Casual dining establishments typically target $15-$25
• Fine dining restaurants can sustain CACs of $50+ due to higher check averages and return frequency

The key question is: How long will it take to recoup that acquisition cost?

If your CAC is $25 and your average profit per customer visit is $10, you’ll need at least 3 visits from that customer to break even on your acquisition investment.

Smart restaurant operators constantly work to lower their CAC by:

• Improving organic marketing (social media presence, community involvement)
• Implementing referral programs (turning existing customers into recruiters)
• Targeting marketing more precisely (focusing on likely customers)
• Testing and measuring different approaches
• Creating shareable experiences that naturally generate word-of-mouth

Remember: The most profitable new customer isn’t always the one who spends the most—it’s the one who cost you the least to acquire and returns frequently!