Customer Acquisition Cost is the cost of convincing a target customer to buy a product or service.
Following costs go into the CAC:
- Production costs
- Creative costs
- Advertising costs
- Cost of marketing
- Technical costs
How to calculate CAC?
Customer Acquisition Cost can be calculated by dividing the cost spent on acquiring more customers by the number of customers acquires in the period when the money was spent.
For example, if a company spent $200 on marketing in a year and acquired 50 customers in the same year, then the CAC is $4.
Ways to cut down on your Customer Acquisition Cost
- Focusing on the right customers - Defining your end-users and retargeting existing customers through proper data and analysis can help to bring down the overall customer acquisition cost.
- Adopt personalization - Conduct market research of target industries and know the pain points target audience. Personalized emails and segmentation can also help to generate more revenue and decrease the customer acquisition cost.
- Market Automation - B2C marketers use marketing automation to cater to cart abandonment programs and nurture their leads. This helps to reduce human errors and thus reduces the CAC.
- Referrals from existing customers - Referrals can help to bring down CAC because customer retention is always a much cheaper process than acquiring new customers.
- Content Marketing - Content Marketing is when you give great content for free to get more web traffic which can be redirected to your product or service. The more attention your content gets, the lesser the company has to spend on paid ads during the customer acquisition process.
- Clearly define your USP - USP defines why the users should pay attention to your offerings, so give them clarity. When the USP is clearly defined, there is no need to spend too much time or money on brand awareness
- Better customer journey - When a buyer’s journey is made easier, it contributes to lower customer acquisition costs. Analyze a buyer’s journey based on their equation with your brand so that you don’t spend on what is not relevant to your target audience.