Customer Acquisition Cost (CAC) is the cost of acquiring a new customer. It's a metric that's calculated by taking all the costs associated with acquiring a new customer and dividing it by the number of customers acquired. It's important to understand CAC because it provides insight into how much money is being spent to acquire customers and whether those investments are yielding results. It also helps you determine whether your marketing and sales efforts are effective at attracting and retaining customers.
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.
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.
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.
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.
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.
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.
Auctor sed ut sit massa lorem sit et, sit. Mi arcu, morbi nibh dictum lobortis risus nisl phasellus. Eget eget fames mauris velit in rutrum. Et dictumst in nisi lectus. Sapien eu scelerisque condimentum sit lorem.
Lectus justo, rhoncus, egestas est donec purus. Auctor porta volutpat egestas proin est dui aenean. Purus arcu mauris varius semper in lectus felis vitae hendrerit. Purus neque pulvinar dignissim a. In mattis cursus augue amet, lorem amet eros. Sociis pellentesque interdum nisl, egestas dolor. Porttitor id arcu sed orci eget egestas. Scelerisque montes, ac elementum aliquet leo.
Proin non sed porttitor in nisi. Adipiscing sit enim vivamus morbi nisi. Senectus leo diam diam volutpat eleifend vitae feugiat id scelerisque. Amet dictum eu pellentesque sed viverra eget. Egestas sed eget tempus ipsum pretium, vel sit egestas risus. Auctor in egestas placerat ultrices suspendisse magna nunc. Sed tempus elit sed auctor eu id ipsum. Eu aliquam convallis accumsan ut justo id posuere ut. Nibh porttitor donec adipiscing porta pulvinar. Morbi imperdiet amet, vitae eu posuere urna duis. Nisl rutrum sed lacus, at non arcu aenean aliquet. Vitae interdum diam nibh ut elementum, mollis. Gravida eget cursus auctor congue elementum sit commodo. Lectus nibh sed vitae justo, aenean. Urna vel aliquam vivamus urna faucibus cras morbi.
Facilisis tempus aliquam amet ut. Purus placerat quam leo pellentesque elit elementum pretium. Consectetur ac rhoncus velit malesuada ut etiam diam velit. Pulvinar venenatis interdum nullam turpis lacus, viverra volutpat sodales facilisis. Vitae id sed nunc libero, cursus cursus.
Pharetra, convallis nibh sagittis non. In lorem vitae eget id placerat cras porta. Tellus viverra rhoncus rhoncus ullamcorper turpis elit velit. Diam nisi iaculis sit vehicula in placerat. Blandit pretium mollis sem faucibus donec id risus id gravida. Nec risus, dui blandit quis. Eget dolor vel tortor in adipiscing leo cursus pulvinar at.