What is customer acquisition cost and how do you improve it?

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Customer acquisition cost or CAC is the expense for an e-commerce to successfully convert a lead into a final client through marketing. It is an essential metric for measuring the growth of a business, as it allows the profitability of startup campaigns to be assessed in order to accelerate the sales funnel. It can be calculated by dividing the total investment in marketing, publicity, and sales by the number of gained clients in the same time period. From this calculation, you will be able to speed up and optimize decision making, as well as revise your pricing strategy and adjust e-commerce costs.

To add value, the CAC should be calculated within a specific time period and be repeated periodically according to the needs of every negotiation. A monthly analysis will allow for adjustment of marketing campaign costs and faster improvement of the business’s margin of benefit.

When calculating the CAC, or customer acquisition cost, all indirect costs resulting from marketing and publicity should be considered. This applies to all actions of inbound marketing which each time include new formats, as has been proven with webinars in the times of this pandemic.  

How do you improve your customer acquisition cost?

In order to reduce the costs regarding customer conversations, we recommend following these pieces of advice: 

  • Get to know your buyer persona and carry out a detailed segmentation of your audience. This way, campaigns will be more effective. 
  • Rate your leads to get to know the level of interest in your e-commerce and your products. In this manner, you can direct offers and calls to action more conveniently. 
  • Invest in actions and loyalty campaigns. 
  • Generate conversation about the brand through social media, with which users can recommend your brand to other potential clients. 

Improve the quality of your content on the web and on social media.

Other metrics to add value in addition to the CAC

The best way to take advantage of customer acquisition cost facts has to do with the other metrics of interest for businesses. On one hand, the comparison of CAC with the value of the promised e-commerce ticket allows you to assess if the investment of actions of catchment and conversion is adequate. So, when dealing with a lower end of average ticket, we cannot organize large scale campaigns, as it would cause losses for the online store.

On the other hand, it’s also helpful to be aware of the lifetime value or the value of the customer’s life cycle, an estimation of the investments that each consumer will generate for the business over the long term. In this sense, with loyal clients that continuously buy from your e-commerce, you can start segmented, more ambitious, campaigns that optimize sales. 

As a whole, the valuable information contributed by the CAC facilitates businesses’ adaption of sales that change based on the behavior of users. Based on its values, a dynamic pricing strategy can be carried out, so that prices of products can be adjusted according to your expenses and to the demand, without affecting the image of the e-commerce brand.

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