To discover how to figure out your customer acquisition cost to be able to make wiser marketing decisions, simply continue reading to discover a guide to understanding everything you need to know about what is customer acquisition cost.
Simply put, your customer acquisition cost is the cost to your business of acquiring a new customer. You may be interested in working out your yearly customer acquisition cost which is a valuable metric that will help you understand how difficult it is for your business to acquire brand new customers and how effective your business’ current marketing strategies are. As if you find that your customer acquisition cost is higher than you anticipated, you may need to revise how you allocate your marketing budget as your current marketing strategies may be holding your business back from growth.
How to work out your yearly customer acquisition cost:
Thankfully it’s simple to work out your customer acquisition cost. Simply divide your business’ marketing costs and sales costs by the number of fresh customers that your business has picked up in the past 12 months or the past fiscal year. To find out your yearly customer acquisition cost. As an example, if your business spends $1000 on sales-related costs and marketing costs in a single year and your business manages to attract 1,000 new customers to your brand, your annual customer acquisition cost will be $1 per customer. Which is a reasonable amount.
However, if the next year you invest $2,000 into sales-related costs and marketing costs and you only attract $1,000 you may want to rethink your business’ marketing strategies. As your annual customer acquisition cost would have doubled from $1 per customer the previous year, to $2 per customer per year.
How to work out your customer acquisition cost per marketing campaign on a single platform:
If you want to accurately assess how a future marketing campaign on a single platform such as Facebook has fared, you can also easily calculate your customer acquisition cost per marketing campaign. Using the example of Facebook, if you pay for a Facebook marketing campaign which includes targeted marketing ads to potential customers, it will be easy to work out your customer acquisition cost. As you’ll be given statistics that will show your customer acquisition cost which will be labelled as your CPA via Facebook Manager. So you won’t even have to bother with calculating your customer acquisition cost per marketing campaign yourself. Which is handy.
Be prepared for the fact that your customer acquisition cost is likely to increase over time:
While you may mistakenly assume that your customer acquisition costs will gradually decrease over time, the truth is that they will gradually increase over time. As when your business is brand new, it won’t be hard to find interested buyers, however as your market share increases, it will become more difficult to find new customers who haven’t shopped with your brand before.
So if you want to be able to check how your individual marketing campaigns are doing and want to be able to increase your customer base over time, hopefully you found the information above useful! And don’t forget to stay up to date on business news and tips to keep your business competitive.
Infographic created by Fiserv, an omnichannel commerce company