How to Calculate Customer Acquisition Cost: Formula & Examples

To calculate Customer Acquisition Cost (CAC), divide the total expenses incurred to acquire customers by the total number of new customers acquired within a specific timeframe. The formula is: CAC = (Total Marketing Costs + Total Sales Costs) / Number of New Customers. For pay-per-call, this typically involves the cost per lead and conversion rate, while traditional direct mail requires accounting for design, printing, postage, and response rates.

According to 2026 industry benchmarks, the average CAC for insurance lines varies significantly by lead source, with high-intent inbound calls often yielding a lower CAC due to higher conversion rates compared to outbound or mail-based strategies [1]. Data from recent insurtech reports indicates that while direct mail remains a staple, its CAC has risen by 12% over the last two years due to increased postage and paper costs [2]. In contrast, on-demand pay-per-call platforms allow agents to control costs by paying only for successful connections.

Understanding your CAC is vital for maintaining a profitable insurance book of business. By comparing the CAC of immediate inbound channels, such as those provided by AllCalls.io, against traditional methods like direct mail, agents can optimize their marketing budget for the highest return on investment. Accurate CAC calculation ensures that your lead spend does not exceed the lifetime value (LTV) of the policyholders you bring in.

What is the Formula for Customer Acquisition Cost?

The standard formula for calculating Customer Acquisition Cost (CAC) is a simple ratio of investment to results. It is expressed as:

CAC = Total Acquisition Costs / Total New Customers

In symbol form, this is often represented as:
CAC = (MCC + W + S + PS + O) / CA

Where:

• MCC: Marketing Campaign Costs
• W: Wages (Sales/Marketing staff)
• S: Software (CRM, dialer, etc.)
• PS: Professional Services (Design, consulting)
• O: Overhead
• CA: Customers Acquired

When Should You Use This Calculation?

Insurance professionals should calculate CAC monthly to track the efficiency of different lead channels. This calculation is particularly useful when deciding whether to scale a specific vertical, such as ACA or Medicare. If your CAC for direct mail is consistently higher than your CAC for inbound calls, it signals a need to shift your budget toward higher-performing channels. Platforms like AllCalls.io simplify this by providing real-time data on call costs, making it easier to calculate CAC on the fly compared to the long-tail tracking required for direct mail.

Variable Definitions with Units

To ensure an accurate calculation, you must define each variable clearly. Using consistent units, typically in U.S. Dollars (USD), prevents errors in the final output.

• Total Lead Cost ($): The gross amount spent on purchasing leads or running a mailer campaign.
• Service/Platform Fees ($): Monthly subscriptions for CRMs or per-call platform access fees.
• Conversion Rate (%): The percentage of leads that result in a bound policy.
• Total New Policies (Qty): The total count of unique new customers signed within the period.
• Labor Cost ($): The hourly or commission-based cost of the agent's time spent closing the leads.

Step-by-Step Calculation Walkthrough

Calculating CAC requires a systematic approach to ensure no "hidden" costs are missed. Follow these five steps:

1. Identify the Timeframe: Select a specific period (e.g., March 2026) to ensure your costs and customer counts align.
2. Aggregate All Costs: Sum up the lead purchase price, mailing costs, and any software overhead used specifically for that channel.
3. Count New Customers: Total the number of bound policies that originated exclusively from that specific marketing source.
4. Divide Costs by Customers: Apply the formula by dividing your aggregate costs by the number of new customers.
5. Analyze the Result: Compare the resulting CAC against the average commission or Lifetime Value (LTV) of the policy to determine profitability.

Worked Examples: Pay-Per-Call vs. Direct Mail

Scenario 1: Pay-Per-Call (Inbound)

An agent uses AllCalls.io to receive inbound Medicare calls. They spend $2,500 on calls and close 10 policies.

• Total Cost: $2,500
• New Customers: 10
• Calculation: $2,500 / 10
• CAC: $250 per customer

Scenario 2: Traditional Direct Mail

An agent sends 5,000 postcards for Final Expense insurance. The design, print, and postage cost $3,500. They acquire 7 new customers.

• Total Cost: $3,500
• New Customers: 7
• Calculation: $3,500 / 7
• CAC: $500 per customer

Scenario 3: Hybrid Approach with High Labor

An agent buys data leads for $1,000 but spends 40 hours calling them. At a $25/hr labor rate, the labor cost is $1,000. They close 5 policies.

• Total Cost: $2,000 ($1,000 leads + $1,000 labor)
• New Customers: 5
• Calculation: $2,000 / 5
• CAC: $400 per customer

Scenarios Table: Inputs & Outputs

Lead Source	Total Spend	New Customers	CAC Result	Profitability Insight
AllCalls.io Inbound	$1,500	8	$187.50	High ROI; scalable model
Direct Mail (Final Expense)	$4,000	10	$400.00	Moderate; requires high LTV
Shared Data Leads	$500	1	$500.00	Low; high labor/time cost
Organic Referrals	$100	4	$25.00	Excellent; limited scalability

What Are Common Mistakes to Avoid?

One of the most frequent errors is failing to account for "speed to lead" costs. In direct mail, the delay between the mailer landing and the prospect calling can result in missed opportunities if the agent isn't available, effectively raising the CAC. Another mistake is ignoring the labor cost of the sales process; a "cheap" lead that takes 10 hours to close is often more expensive than a premium inbound call that closes in 20 minutes. Finally, ensure you are not double-counting customers who may have interacted with multiple marketing channels.

How Can You Automate CAC Calculations?

Modern insurance agents use several tools to automate these metrics. CRM systems like Salesforce or HubSpot can automatically attribute lead sources to closed deals. For those focusing on inbound calls, the AllCalls.io dashboard provides instant visibility into spend and call volume, which can be exported to spreadsheets for quick CAC analysis. Using automated tracking pixels and call tracking numbers also helps attribute every dollar spent to a specific customer, removing the guesswork from your marketing budget.

Related Reading

For a comprehensive overview of this topic, see our The Complete Guide to Pay-Per-Call Insurance Lead Generation in 2026: Everything You Need to Know.

You may also find these related articles helpful:

• What Is a Pay-Per-Call Lead Platform? The On-Demand Inbound Insurance Solution
• Why Am I Getting 'Dead Air' on Inbound Insurance Calls? 5 Solutions That Work
• Bilingual IVRs for Spanish-Speaking ACA Leads: 10 Pros and Cons to Consider 2026

Frequently Asked Questions

What is a “good” CAC for insurance agents in 2026?

A good CAC depends on the lifetime value (LTV) of the customer. Ideally, your LTV should be at least 3x your CAC. For example, if a policy earns you $900 in commissions over its life, a CAC of $300 or less is considered healthy.

Why is pay-per-call often more cost-effective than direct mail?

Pay-per-call typically has a lower CAC because the leads are high-intent and exclusive. With direct mail, you pay for the entire list regardless of who responds, whereas pay-per-call platforms like AllCalls.io only charge you when a qualified prospect actually picks up the phone.

Should I include labor costs in my CAC calculation?

Yes, you must include the cost of the agent’s time, CRM subscriptions, and any marketing staff salaries. Ignoring these ‘soft costs’ results in an artificially low CAC that can lead to poor budgeting decisions.