The customer acquisition cost or CAC is one of the most important metrics applied to online marketing that helps us to know the real value of our customers, as well as to know which are the most effective channels when acquiring new customers.
What is the cost of customer acquisition
ACC It is the economic investment we have made for each new client. For example, if we have spent 3,000 euros on an online marketing campaign and we have obtained 200 clients, the average CAC will be 15 euros. The most recommended thing is that, in addition to calculating the average CAC, we carry out this same operation in each of the channels in which we have invested (SEM, Facebook ads, …) to know what is the cost in each of them.
But how do we know if we are making a good investment? Taking the previous example, if the CAC is 15 euros, but the average purchase of each client is 20 euros, we must rethink the strategy since we are spending too much to get new clients. However, if our customer acquisition cost is 200 euros, but my average sale is 2,000 euros, we will be making a good investment. It all depends on our objectives and the gross profit obtained from each sale, since selling pens or notebooks is not the same as selling cars or luxury products.
How the cost of customer acquisition is calculated
To calculate the CAC we have to divide the total amount spent on the marketing and sales campaign by the number of new customers acquired with that investment and in that period.
CAC = total costs of the marketing campaign / new clients obtained
What costs do we have to include? These are some of the costs that we have to take into account when we calculate the CAC:
- Advertising in traditional media (press, radio, television).
- Online advertising: media banners, sponsored articles, Adwords, advertising on , etc.
- Costs of the sales team, if there are vendors hired to help us in the campaign.
- Events in which we want to be present to make ourselves known such as fairs, stands, etc.
Relationship between CAC and LTV
The calculation of the CAC must be done with a certain periodicity and taking into account the Lifetime Value or LTV which we can define as the net value of the income generated by a customer during his lifetime as such.
To calculate it, we must take into account the following data:
- Customer lifetime (TV)
- Purchase recurrence ratio (RC)
- Average Net Customer Spend (GM)
Once we have them, the LTV is calculated with the average cost that the customer makes on each purchase multiplied by the recurrence of purchase of the products during a given period and all this multiplied by the customer’s lifetime, that is, the number of years you are our client.
LTV= Average Spend x Acquisition Recurrence x Customer Life
The Lifetime Value is a very important metric since it refers to the purchases made by those who are already our customers. And it is proven that the probability of selling to those who are already loyal is greater than that of a potential customer.
Therefore, the CAC cannot be calculated without relating it to the LTV since, if what we want is to make a return on what we have invested, the CAC must be less than the LTV because in this way it will be costing us less to attract a client than what we obtain from him. Specifically and according to what has been pointed out by different experts, the ideal for the cost of each new client to be profitable is for the CAC to represent 10% of the average value of its life cycle or LTV.
Image:
Stay informed of the most relevant news on our news channel
Facebook Comments
Disqus