Challenges with Customer Acquisition Cost
The issue with CAC is that it does not accurately represent the true expenses of acquiring a client since it only accounts for direct expenditures—you do not account for indirect costs such as salary or training costs. Because you don't have visibility into indirect costs, it's difficult to identify what's driving up your CAC; all you know is that some expenditures are growing over time.
In addition to this challenge, there are two other major challenges with measuring CAC: first, getting insights down to the channel or customer level is even more difficult and is usually not performed on a regular basis; second, even when you do get insights down to the channel or customer level, determining whether those channels are profitable for your business can be difficult.
The problem for our customer was determining whether he should include LinkedIn, Facebook, or Google Ads in his customer journey or funnel. So, we need to know where we get new clients, how much we spend on cost per click, and where we should optimize the advertisement.
Calculate Costs per Lead: The customer challenge
We were reducing the cost of acquiring new customers for the customer bases, and now we want to know where the actual cost per lead is or how much it costs. We are dealing with a multi-step, difficult calculation. We have both soft leads and hard leads, but hard leads are clients that sign contracts before becoming genuine customers.
A soft lead is just someone who scheduled a call, and we're interested in knowing how much we pay for soft leads vs closed deals or hearts. Then, we must be aware that the marketing team and the sales team both receive the insights we developed in order to tailor our Google, Facebook, and LinkedIn advertising to our intended audience. When not done often, getting these insights down the customer's channel and to the customer level might be challenging. Therefore, we must contrast this with our CRM data. In the instance of one of our customers, it was on HubSpot as opposed to the channels they employ.
The solution for CAC calculation in 3 steps
- Build a central database
You can build a central database on Airtable, Google Sheets, or on Postgres SQL. We combine the charges from all the various LinkedIn, Facebook, or Google channels and automatically assign these fees, per campaign, per ad group, and per keyword, to the client who scheduled a call. You can choose to do that for both offline and online businesses.
- Recognize the various cost purchases
The next step is to comprehend each cost acquisition we had per customer and then keep track of this in our HubSpot CRM dashboard so that we can determine how much we spend on each client and how much this sale, with whom we are currently on the phone, cost us.
- Automate the process
We have an automated system, and you may use it for several channels if your company runs a project-related enterprise in addition to an online store and SaaS service.
You can easily determine how much it costs you in marketing expenses per client to close a sale. And from there, we translate this into some KPIs that let you know that, yes, we do have a payback period or, as we like to put it in marketing, a client lifetime value.
Result how to calculate CAC the easy way
When the customer's lifetime value begins to rise, and the breakdown of all expenses devoted to this one specific individual or how many people we converted as a result of this campaign. We can examine this across multiple tunnels and channels using the client acquisition cost calculator we created, as well as integration between various marketing tools and web platforms, as well as a properly developed database back end.
Tools we used here:
- Google Ads
These customer acquisition insights push the sales and marketing teams to focus even more on the needs of the consumer, and they also aid in making our marketing more adept at running effective advertisements.
Would you like to learn more?
Check out our posts about Google Looker Studio and Power BI to present the Data of costs per customer in a nice and fancy dashboard.
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