Successful companies pay close indonesia mailing list attention to calculating and analyzing the cost of attracting a client, using the results obtained to optimize the marketing funnel.
CAC (Customer Acquisition Cost) is an indicator that can be used to determine the cost of one new customer. The English term User Acquisition Cost is also used.
Customer Acquisition Cost (CAC – an abbreviation for customer acquisition cost) depends on:
advertising campaign costs and sales volume. In addition, the expense item includes salaries of sales and marketing department employees;
number of new customers attracted.
Types of Lead Magnets
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The implementation of any business process cannot be successful without a forecast of advertising marginality. When investing in marketing activities by creating a website, organizing e-mail newsletters, publishing messages on television, radio and social networks, an entrepreneur is interested in what return he will receive.
Knowing how to calculate and analyze metrics that characterize the cost of attracting a client, a businessman will have a clear idea of the economic effect of the advertising campaigns being launched. That is, it is necessary to determine the income received from the client throughout the entire period of his activity and compare it with the costs of attracting him.
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Goals for tracking customer acquisition cost
CAC monitoring allows you to:
Determine the cost of attracting a customer. Simplified: expenses amounted to 1,000 rubles, with the help of these funds two purchases were made. Therefore, the cost of a lead is 500 rubles.
Find and use profitable acquisition channels. By comparing the return on new user sources, you can evaluate the effectiveness of each of them. For example, the costs of contextual advertising amounted to 900 rubles and as a result 3 buyers were attracted. And 1,000 rubles were spent on targeting in a social network, and 4 clients were received. As you can see, the second channel is more profitable with higher costs, since the cost per buyer is 250 rubles, and in the first case - 300 rubles. But in practice, of course, everything is much more complicated. Below we will tell you in more detail how the cost of attracting a client is calculated.
Optimize marketing expenses. Calculating CAC helps company managers get an objective assessment of the effectiveness of advertising campaigns and the prospects of the attraction channels used. Too high a value of the indicator indicates the unprofitability of the source of leads or an unprofitable strategy for promoting a product or service.
Adjust the cost of products. If fewer resources are spent on attracting customers compared to competitors, you can sell the product at a reduced price and make a larger profit due to increased turnover.
Carry out high-quality planning and form a balanced budget. Having determined the cost of attracting a client by industry and market niche, marketers can develop both long-term strategies and operational plans with optimization of expenditure items.
Conduct an estimated payback forecast. Comparative analysis of CAC and LTV (Lifetime Value) values helps to obtain an objective assessment of marketing marginality. If the cost of attracting a customer is lower than the lifetime value of the customer, the company makes a profit from each customer acquired.
Make informed and well-founded decisions when developing a marketing strategy. Knowing the average cost of attracting a client, top management purposefully selects the most profitable channels. At the same time, investment resources are significantly optimized. For example, it turns out that one of the sources of attracting customers has a low CAC with a high ROI. In this case, more effort and money can be invested in a promising direction.
You shouldn't equate CAC with CPA (Cost per Action). The second term means the online advertising payment model. Most often, this is some target action of both a new and an already attracted user: registration, response, download, viewing a price list, etc., which the company rewards. Thus, these are completely different concepts, since CAC reflects the total costs of marketing and sales organization.
In simple terms, CAC is the total cost of attracting a new client. This is a key parameter that characterizes the commercial effect of the entire business process.
A correctly determined value of the indicator demonstrates the effectiveness of the channels used to attract customers and allows you to direct investments into the most effective marketing tools.
Calculating the cost of attracting a new client in today's increasingly competitive environment takes on special meaning, since without knowledge of economic success there can be no talk. At the first stages of launching a business process, it is necessary to actively invest in building a client base. As it develops, the amount of these costs will decrease, and sales volume will grow. The problem is that it is necessary to determine exactly how to calculate the cost of attracting one client, taking into account the specifics of the company.