Contemporary online analytics allows tracking customer behaviour and targeting advertising activities precisely for them. Do you take advantage of these possibilities? Do you know how much it costs you to acquire a new customer? This is very valuable information that is worth comparing with data on the consumer lifecycle. Then we will get a clear picture of which marketing channels we should choose and what amounts are worth investing in order to acquire a new client and additionally we will find out how much revenue we will be able to generate in a given period of time.
How to calculate the cost of acquiring a client?
CAC (Customer Acquisition Cost) is a measure presenting the cost of acquiring a new customer. This is the quotient of costs incurred for promotional activities to the number of new customers.
You can calculate it according to the formula:
For example, if you invest £500 on Facebook and Google Ads, and gain 10 new customers in this way, the CAC is £50.
Is this a lot? It depends. The CAC value should be related to the realities of the business and to the LTV index, i.e. to the client's lifetime value. LTV allows us to estimate how much profit we will gain thanks to the new consumer in a given period of time.
What does the CAC indicator inform about?
The cost of customer acquisition can also be calculated for each marketing channel individually - for email marketing campaigns, Google Ads or social media ads. Then we will receive accurate information on which promotion channel works effectively and supports sales in your e-commerce, which needs to be optimised or completely abandoned.
If you know which marketing communication channels in your e-commerce have the lowest CAC, it's worth doubling your expenses. The allocation of the marketing budget to channels with a lower CAC value allows you to attract more customers while maintaining a fixed budget amount.