For consumer loan companies, what is CAC?
Customer acquisition cost, or CAC, is the amount of money spent on sales and marketing required to fund a new customer’s loan. It is calculated by summing a consumer lender’s total sales, and marketing spend and dividing it by the number of new customers acquired.
Lenders can calculate CAC for a given time period or all time and is helpful to compare the effectiveness of different marketing tactics and strategies.
Of course, a lower CAC is better, as it suggests your marketing and sales teams are effective at targeting your customer avatar efficiently.
What is the purpose of customer acquisition?
The purpose of customer acquisition is to find a repeatable, methodical way of attracting customers to your lending business. Your goal is to increase your “book; your portfolio. Consumers by the millions are applying for small-dollar loans daily. You’ve got to get more than your share! You cannot wait for borrowers to naturally come to you.
Your goal is to create an efficient, systematic, ongoing strategy to acquire new borrowers, service existing borrowers, and grow your “money on the street” in order to scale loan fees generated.
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