What is primarily analyzed when calculating customer acquisition cost (CAC)?

The calculation of customer acquisition cost (CAC) primarily focuses on the total expenses associated with gaining new customers, specifically by analyzing sales and marketing expenses divided by the number of new customers acquired. This method enables businesses to understand the effectiveness of their marketing strategies and sales efforts in converting leads into paying customers.

By including both sales and marketing expenses in the calculation, companies can assess the total investment required to attract and convert each new customer. This holistic view ensures that all relevant costs are taken into account, allowing for a more comprehensive understanding of the cost-effectiveness of customer acquisition strategies. Additionally, dividing these expenses by the number of new customers provides a per-customer cost metric, which is crucial for evaluating profitability and budgeting for future marketing efforts.

The other options focus on narrower aspects of the business. Only analyzing marketing expenses ignores the contributions of sales efforts, while looking solely at total revenue generated does not reflect the costs incurred to achieve that revenue. Finally, considering only customer service costs overlooks the acquisition aspect and fails to provide a complete picture of the costs associated with bringing in new clients. Therefore, understanding CAC as a measure that encompasses both sales and marketing expenses gives businesses valuable insights into their customer growth strategies.