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The customer acquisition cost (CAC) refers to the marketing, advertising, support, and other types of expenses required to convert a prospect into a customer. CAC usually excludes the cost of a sales force (the salary and commissions) or payments to affiliates. Some companies carefully segregate promotional expenses, such as loyalty programs, that relate to branding or customer retention. As long as you apply your definition consistently, you’re okay.

If your goal in social media marketing is branding or improving relationships with existing customers, CAC may be a bit misleading, but it’s still worth tracking for comparison purposes.

The definition of your customers and the cost of acquiring them depend on the nature of your business. For example, if you have a purely advertising-supported, web-only business, visitors to your site may not even purchase anything. They simply show up, or perhaps they register to download some information online. Your real customers are advertisers. However, a similar business that’s not supported by advertising may need to treat those same registrants as leads who might later purchase services or pay for subscriptions.

The easiest way to define your customers is to figure out who pays you money.