Customer Acquisition Cost (CAC) is one of the strategies commonly used by Digital Marketers to find out and measure how effectively it is running.
A Digital Marketer certainly expects business growth in terms of digital. The growth in question is the success of achieving various digital marketing strategies such as campaigns, ads, and so on.
However, this growth must be measured and its effectiveness known. By learning about CAC, you can plan a better digital marketing strategy.
Understanding Customer Acquisition Cost (CAC)
As explained earlier that when compiling a digital marketing strategy, you need to create a campaign or ads in order to reach more users. To create a campaign or ad , of course, a fee is required, which is usually known as the Customer Acquisition Cost.
Cost Acquisition Customer or Customer Acquisition Cost (CAC) is the expense calculated to attract and get the targeted customers of the business.
Simply put, the costs needed for CAC purposes are useful for attracting people who have the potential to become your potential customers. Thus, you need to do the right calculations so that the costs incurred can generate large profits for your business.
However, there is one thing you need to remember that campaigns and ads not only depend on the amount of CAC costs incurred. But it also depends on how you can make customers loyal to the products or services you offer.
According to Patel, this CAC provides positive benefits for both companies and investors.
The reason is, investors will see how much a company needs to bring in customers. Therefore, companies need to calculate this CAC to explain what their performance is like through the implementation of digital marketing strategies.
How Important is Customer Acquisition Cost?
After you know what Customer Acquisition Cost (CAC) is in the previous discussion, then you also have to know the importance of implementing CAC in a business.
This is because CAC shows how a company optimizes its spending.
Especially spending to bring in customers, especially in terms of digital marketing.
If a company can cut costs to bring in customers, then it will bring greater profits for the company.
But on the contrary, if the costs you incur are greater than revenue, it indicates that there is a problem with your business or digital marketing method.
Functions of Customer Acquisition Cost
In addition to understanding the importance of implementing Customer Acquisition Cost (CAC), you also need to understand what the functions of CAC are, especially the point of view for business owners and investors.
a. Business Owner’s Perspective
High CAC and low CLV indicate that the current acquisition process needs improvement.
While a low CAC implies that your business has spent money efficiently and will see higher profits.
b. From an Investor’s Point
This CAC metric is important for calculating how much investment a business needs to stay afloat. In addition, it conveys investment feasibility for investors because it helps calculate ROI.
How to Calculate Customer Acquisition Cost?
The following is the formula:
CAC = Total Costs Expended / Number of Customers Obtained
*Within a certain period of time
Among them are advertising costs on various platforms, advertiser wages, and other things related to making advertisements divided by the number of customers obtained.
Thus, you need to reconsider various things related to making advertisements that can attract customers.
One of the main and important things to take into account is the cost of advertising on different digital platforms. The cost of advertising on Facebook, of course, will be different from the cost of advertising on platforms like Youtube or Google where you need to take into account CPC (Cost Per Click).
CAC costs are not only limited to campaigns and ads , but also include when you use the services of a third person to manage your digital marketing strategy.
How to Increase Customer Acquisition Cost
Although implementing CAC is useful in attracting the attention of your prospective customers, of course there is no definite and most effective formula in bringing in many potential customers.
There are many things you need to do in optimizing this CAC, one of which is to actively try various kinds of trials (testing) to achieve the desired results.
There are several kinds of trials that you need to do, among others, modifying copywriting, ad composition, and ad volume on each digital platform. Nevertheless, there are several things that you need to pay attention to in optimizing your Customer Acquisition Cost, including the following:
1. Increase Conversions on the Website
There are some basic things you can do to increase conversions on the website. Among them are improving the appearance of the website, accelerating the speed of loading , and optimizing the appearance of users on a mobile.
2. Increase User Value
With the increase user value, it will indirectly attract customers to buy a product.
3. Apply Customer Relationship Management (CRM) Strategy
To implement CRM, you can do several things such as by providing email marketing (newsletter) or increasing informative content on your blog.
Things You Must Pay Attention to in Implementing Customer Acquisition Costs
After you understand the meaning of Customer Acquisition Costs, what are their functions, how to calculate them, and how to increase them, of course, you hope to get new customers.
Therefore, you need to do the following things so that the Customer Acquisition Cost strategy that you have done is not in vain.
- Have a proactive communication network so that customers can get to know your company more closely
- Dare to accept criticism and suggestions to increase value of your company
- Actively create educative and informative content so that it can provide positive benefits for customers
- Update with the development of the product or service you offer through digital platforms or email marketing
The bottom line, the thing you need to pay attention to in implementing Customer Acquisition Cost is how to calculate it effectively so that you can attract many new customers through digital marketing strategies.
By looking at how much you have spent and how many customers you get, then there are things you can do.