Cost to Acquire Customer

There are many things that one must consider when setting up their planning for 2010; business objectives/goals, marketing, sales goals, etc. And if you are an existing business with a good documented financial history, chances are you can perform a customer acquisition analysis. This simple, yet insightful analysis provides you with a means to gauge the success of each marketing and sales activities in relation the number of acquired customers. For those businesses that have never measured their marketing activities this is a simple one to implement and utilize.

Since we are in the age of electronic marketing, let’s take a look at an example that involves a website initiative.

Monthly visitors to website: 2000

Monthly promotion costs: $2000

Monthly maintenance costs: $250

Let’s assume that this business has a 20% net profit margin, and that the services or products cost $10, so that is a $2 profit to the business. With the above monthly costs of $2250, the business will have to convert 1125 of the visitors to the website to break even (cost/margin). And if the business wanted to look at the cost to lead the 2000 visitors to their website (acquisition cost), they can take the total monthly costs, $2000 + $250, and divide by the number of visitors to the site, the customer acquisition cost (CAC) is $1.12 per customer.

As you can see, this approach allows you to determine how you can evaluate your next marketing initiatives and help you to make smarter decisions.