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All marketers and advertising agencies in Egypt are looking to have new customers and grow their business, but as we all know; everything has a cost in return.
Getting new customers means paying more money; so here is how to calculate your Customer Acquisition costs.
What are the acquisition cost?
Customer Acquisition costs, also known as (CAC), refers to the amount of money your company should pay for marketing and sales to get new customers.
Customer Acquisition costs help you measure your ROI (Return on investment), especially if you are a web-based company.
How to calculate Customer Acquisition costs?
Balance is the secret, If you are seeking to get new customers, you should measure how much money you will pay, and how much money you will get in return.
Without balance, you are going to lose your money and efforts. The acquisition costs help you measure how much money you will pay and how much you should earn. Customer Acquisition costs can be calculated by dividing the marketing and sales cost you have paid to get new customers within a timeframe.
In other words; you can divide the total cost of sales and marketing over a timeframe, by the total number of customers acquired over a specific period.For example; you intend to pay 500$ to get 500 new customers in only one month; so your Customer Acquisition costs is 1.00$.
Benefits of the Customer Acquisition costs
Calculating your Customer Acquisition costs has many benefits, such as the following:
1- Helps in optimizing LTV/CAC ratio:
Experts say that; every quarter you should manage your LTV/CAC ratio.
LTV refers to lifetime value, and also known as CLV or customer lifetime value.
It is the amount of money your company makes from every customer, during his lifetime of purchasing your business.
CLV affects your CAC; so you need to keep the total result at least 3 or higher, which means that every dollar you pay will get you three or higher in return.
2- Helps you in optimizing a payback period:
AC is also helpful in optimizing the payback period, or in other words, it can help you guess when you will get your money back and make a profit.
3- Helps in tracking the CAC ratio:
Not only you can measure your money, but also CAC helps in tracking and optimizing the CAC ratio.
How to improve your Customer Acquisition costs?
Now it is time to tell you the secrets behind improving your Customer Acquisition costs.
1- Optimize your marketing and sales funnels:
You should identify every step, and measure how many opportunities you have to turn your unknown website visitors into qualified leads.
2- Optimize your Pricing strategy:
You should optimize your pricing strategy, and make sure that you have put your money into trusted channels, so you can get money in return.
Time to sum up:
To say that you run a successful business; you should pay attention to CAC or Customer Acquisition costs.
It helps you make sure that every dollar you have spent will get you customers and more money.