Do you know?
You might have numbers running through your mind about how much you're spending on a social media campaign, or how much it costs to maintain an active blog on your website - but this is a different question altogether.
Let's say you got up this morning to see a new sale from a brand new customer. A lead turned into a customer - huzzah! Now, how much did it cost you to convert that lead into a customer? And then convert them into a loyal customer?
What we're talking about is actually called your customer acquisition cost. Customer acquisition cost (CAC) is an important metric because it allows you to evaluate if it costs more to acquire a customer than that customer is worth. Basically, it's the metric that tracks if the ruby you're mining is worth it.
Based on my calculations
Simply speaking, to calculate your CAC, divide your marketing expenses by the number of customers acquired over the period of those expenses.
Easy-peasy, right? It is and isn't at the same time.
For instance, for your marketing expenses, you may want to include expenses revolving customer relationship management and developing a pristine user experience on your website. You may also have some marketing investments that take more time to fulfill their true potential.
Let's get specific
You can also calculate your customer acquisition costs within specific marketing channels. This can be a little more tricky as you'll need to decide what determines which channel is responsible for each customer.
Determining which avenue achieved the acquired customer is the tricky part. For example, a customer could say that he/she found out about your company from a Google search. But, he/she could have seen a social media advertisement and a digital retargeting ad along the way. But they only reported the last one they saw.
You can try using last touch analytics as an indicator, but it's likely your marketing efforts are all working in conjunction with one another.
So while you can identify a general CAC for specific channels, there needs to be at least the recognition that those numbers are more of an estimate than anything hard and fast.
However, that doesn't mean they aren't valuable. As you try different strategies, the CAC is something that can help you see what methods are working and which aren't.
Down and dirty
We often find that businesses haven't dived down into their own numbers. They know how much is spent on marketing and roughly what worked or didn't. However, they don't know how much they need to spend to acquire a new customer. But if you want your business to avoid overspending, paying attention and analyzing your own numbers is the only the way it'll work.
You can figure it out on your own or you can call StellaPop in and we can set you up for success.