Customer Acquisition Cost (CAC) is the cost of the process of acquiring a new customer. This includes the money spent on sourcing leads and turning them into loyal customers. Interestingly, this is a pain point for many businesses out there, and there have been many times when the cost has spiraled out of control only to be discovered by the service that it is too late to do anything about it. Now that is not a desirable situation to be in by any means, and one needs to make sure that this scenario is avoided.
Being a metric that has grown in use over the past few years, the first aspect to deal with is knowing how to calculate your CAC. On a basic level, this involves dividing the total cost of marketing and sales with the number of new customers. When one digs deeper, the total cost must include even the salaries of your sales team plus the marketing budget and other outreach work, if any. Here, even CRM (Customer Relationship Management) plays a vital role, and once you take care of certain aspects like salesforce pricing and the like, things will become a lot smoother for you in the future.
Speaking of which, here are the ways you can keep your CAC in check:-
- Define your target properly: This mainly involves focusing on proper users. Once that is done, you will be able to create a thorough buyer persona. Once you make that model, you should concentrate all of your marketing efforts around this so that you achieve your targets within the right time-frame.Furthermore, you can even focus on the aspect of retargeting for users who visit your website but don’t complete the needed action. This also needs to be taken into proper consideration.
- Focus on customer retention: Being the main metric that is used to count and track the activities of your customer, it is even more vital to focus on retaining the customers that you already have, since acquiring a new user is a lot more expensive than keeping existing ones. This is not something that you can afford to forget anytime soon.The moment you focus on a blend of customer retention practices, the more opportunities you will have to enable your users to help your service get the best results. Some of the ways of doing that include building a tight community around your service, leaving positive comments and spreading the word by giving recommendations to other people.
- The aspect of automation: There is no better way to speed up a process that otherwise requires manual efforts with the help of automation. Be it through lead generation or emails. Not only will you save a considerable amount of time and money, but the ultimate payoff is that you will see an increase in revenue in about six to nine months
With all of the above pointers, this is not to say that one should not spend more money on converting potential customers if it is called for. But there certainly needs to be a limit, and one must assess the situation in its entirety before making that decision. That is an absolute must.
All in all, it is quite a necessary metric with one of the key points being to acquire new users in the cheapest and most efficient way possible. In the worst case, scenario, failing to do that may very well result in you going bankrupt before you even know it. By tracking all of your costs per user, you will be able to manage your marketing strategies accordingly.