What is Your Customer Acquisition Cost?

What is Your Customer Acquisition Cost?So what IS your customer acquisition cost? If you are like most business owners, you probably don’t think about the actual cost of your advertising and marketing. Yes, you know what you spend, but do you know how many people it brings in? What they spend?

Ask yourself this question: what is the focus of your business? Your products or services? If your focus is on your service or product, your business won’t grow as fast as you’d like. It doesn’t sound logical, but it’s true. Think about it, you can have the best products or services out there but what good are they if no one comes in to buy them? So spending your focus on what it takes and what it costs to get customers in the door is time and money well spent. So now you need to ask yourself: what are you doing to get customers into your business?

Before you decide how to change how you spend the money you have on advertising and marketing, you need to know a few things. First, what your average profit is on a sale. Next, you need to know your customer cost.

Customer cost is what it costs you in advertising and marketing to get customers in the door. Why? Because knowing these two figures will tell you your allowable acquisition cost. The allowable acquisition cost is profit less customer cost. In other words your allowable acquisition cost must be less than your profit margin from your sales. If it isn’t you are throwing money away. So, if your average profit is $100.00 and your customer cost is $70.00 then you need to be sure that your allowable acquisition cost is less than $30.00.

So now you can take that figure and revamp your advertising and marketing budget, unless what you are doing is going well. Keep in mind that doing things like free giveaways bring in customers. Remember, giving away things doesn’t cost money because the number of customers it brings in outweighs the small cost of the giveaway. Also, referral programs are much more successful and keep that allowable acquisition cost low.

So know your customer acquisition cost, and use it, or tweak it, to your advantage!

Need some help getting your customer acquisition cost figured out? Give us a call today 727-786-2900

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