When it comes to financial management, business owners have a variety of pathways and certifications to choose from. Two of the more popular options are Certified Accounting Consultant (CAC) and Certified Public Accountant (CPA). Understanding the differences between the two and making an informed decision about one or both can be beneficial for any business. In this blog post, we will explore the similarities and differences between CAC and CPA to help you determine which certification(s) are best for your business goals. We will also look at the advantages and disadvantages of each, so you can make an informed decision.
CAC vs CPA: What They Mean, Why They are Important & How to Use Them (Growing & Scaling a Business)
What is CPA?
CPA, also known as cost per action or cost per lead, stands for cost per acquisition. This metric assesses the overall expense of acquiring and qualifying a lead. Before acquiring a customer, marketing and sales professionals engage in lead generation. It involves interacting with customers and generating interest in a company, product, or service. Business leaders evaluate CPA before CAC, and a strong CPA metric indicates that a company may soon acquire a customer.
CPA is a tool for evaluating the success of marketing initiatives and plans. Here are some examples of CPA costs:
What is CAC?
CAC is customer acquisition cost. This metric calculates a company’s overall cost of luring and acquiring new clients. It consists of the price of selling to implement sales tactics and the price of marketing to generate leads. Here are some examples of these kinds of costs:
Business leaders can use CAC and CLV, or customer lifetime value, to determine how much money they are making from each customer interaction. They can use this information to assess the company’s financial health, forecast future financial trends, and assess the viability of various business decisions.
CAC vs. CPA
Here are the differences between CAC and CPA:
Formulas
Choose a time period in which to collect data for your variables before calculating either CAC or CPA. This could be a week, month, quarter or year. You can manage your calculations and obtain more precise results by doing this.
Make sure to account for the marketing and sales cycle when calculating CAC. The time between investing money in sales and marketing and acquiring a customer is known as this. Make sure to distinguish between new and returning customers as well. Customer retention can be calculated to provide more context for your findings. The basic formula for CAC is the following:
CAC is calculated as (total marketing and sales expenses combined) / the number of new customers.
The basic formula for CPA is the following:
CPA equals the campaign’s overall costs divided by the number of acquisitions
Benefits
CAC measures the cost per paying customer. Business leaders can review actual financial data and comprehend costs, revenues, and profits for the company along with CLV. These facts are crucial for determining whether a company will be financially viable and able to continue operating for a long time. Business leaders may use CAC to demonstrate the viability of the business model to stakeholders and investors in an effort to secure funding for ongoing operations and new projects.
CPA measures the cost of acquiring non-paying customers. It keeps track of metrics like the price per lead, price per registration, price per sign-up, and price per activation. This metric is advantageous for software-as-a-service (SaaS) companies in particular because they can use it to evaluate the effectiveness of their marketing strategies. For instance, CPA enables them to calculate how much a company pays for each customer who signs up for a subscription service.
Strategies
A company can work on enhancing its marketing and sales strategies in order to improve the CAC metric. They can specifically work to improve their closing techniques, or the steps they take to turn a lead into a paying client. Businesses can enhance their strategies for luring customers and generating leads to increase the CPA metric. They might provide more chances for viewers to interact with and learn about the company, like free trials.
Examples of CAC and CPA
To help you comprehend the ideas, consider these CAC and CPA examples:
Example 1
Here’s an illustration of how a coffee shop could apply these metrics:
Visitors to the coffee shop BrewBros are given cards that allow them to receive a free drink after purchasing nine drinks. The business can use CPA to calculate the costs per cardholder. This is because they are potential customers who have not yet made a purchase. It can use CAC to calculate the costs of attracting customers who actually purchase drinks.
Example 2
Here’s an illustration of how a streaming music service might make use of these metrics:
A month of free streaming is available as part of Listen Shop’s free trial, which users can sign up for. The business can use CPA to calculate the costs of enticing customers to sign up for the free trial. They can use CAC to calculate the costs of getting customers to sign up and begin paying for the subscription service.
Example 3
A social media platform might use these metrics in the following ways, as an example:
A social media platform called FriendsConnect uses CPA to calculate the costs per registration or per user who creates an account. Since these are actual paying customers, it uses CAC to calculate the costs per business that purchases advertising space on the platform.
Tips for using CAC and CPA
Here are some tips for using CAC and CPA:
FAQ
What is CAC in digital marketing?
The CAC of a business is the sum of its sales and marketing expenses over a given time period to acquire a new customer. Due to the fact that it contrasts the amount of money spent on attracting customers with the number of customers they actually acquired, businesses use this metric to assess their profitability.
Is customer acquisition cost and cost per acquisition the same?
The cost of acquiring new customers is known as customer acquisition cost, or CAC. The total cost of sales and marketing efforts, as well as any property or equipment, required to persuade a customer to purchase a good or service, is known as CAC.
What is CPC and CAC?
Understanding the distinction is the first step to a thorough understanding of CAC. CAC specifically measures the cost to acquire a customer. The cost to acquire something other than a customer, such as a registration, an activated user, a trial, or a lead, is measured by CPA (Cost Per Acquisition).
