Evaluating Customer Acquisition Cost & Success

- Anand Katakwar

August 21, 2021

Marketing is becoming costly day by day, and so is becoming customer acquisition. It has always been crucial for business organizations to acquire as many customers with an as little marketing budget. After all, this is what determines the business growth, right? Yes, it does, but there are few important things to consider before a business can gain customers and turn into a successful one.

To gain useful insights about how to get new customers with low marketing budget, it is necessary to know what the priorities of Marketing are. Although marketing aims at acquiring new customers, its priorities are:

1. Reducing the cost of acquiring customers

2. Improving the ROI of marketing efforts

To achieve these aims, it is important to know what customer acquisition is and how it should be done to utilize the marketing budget in the least amount and most profitable way.

What is Customer Acquisition?

Customer Acquisition is the process of acquiring new customers or clients for your business. It aims to put in place a flexible and diversified strategy to gain new customers that can contribute to the revenue of the business organization. Once the customers are acquired, the next and another most important step is to leverage newly acquired customers to loyal customers.

The lifecycle of gaining customers is to spread awareness of the brand, bringing it into customer’s consideration, so the customer can make the favorable final decision of being a customer of your business.

It is understandable why it is so important for any business, yet it is also necessary to know the two wide-aspect purposes of customer acquisition, which are:

1. To build revenue and profits.
2. To determine business growth.

Like every other marketing strategy, CA also emphasizes on building revenue and enhancing business growth. It is the root of every business because, with no customer, there is no business.
Customer acquisition is not a single effort but a combination of efforts. Also, it’s not a one-time thing to do only at the initiation of the business. It is a strategy that works over various channels to bring customers from wherever it can. Such channels include email marketing, social media marketing, search marketing, web push notifications, blog, videos, etc besides the traditional print and television promotions.

The strategy for acquiring customers should be:

1. Diverse (the more channels to target, the more chance of acquiring customers)
2. Flexible (trends keep changing with time, so the strategy must also)
3. Sustainable (which can last in the long run without always requiring the input of money)
4. Targeted (80/20 Principle: 20% of your customers give 80% of the business, so it’s important to know who your best customers are).

So far we know the importance of marketing and what it aims to achieve through customer acquisition. We also know what the CA strategy should be like. But how much does customer acquisition costs? How to calculate it? Can it be minimized? How to achieve it easily and with the least budget? Stick together till the end to find out everything.

What is Customer Acquisition Cost?

In the world of business, nothing happens by itself. What you want to achieve from your business, you need to first give input for that. Similarly, the money spent by a business to bring and acquire a customer is known as customer acquisition cost (CAC). It includes the costs of marketing, events, advertising, etc. CAC can be campaign wise or time-bound for a particular frame of time; yet, CAC is a regular member of the marketing budget.

The acquisition cost is a significant entity to measure ROI. CAC includes the cost of lead generation, lead acquisition, and lead conversion. This is why customer acquisition cost demands constant recalculation to know what output it is providing and whether it is doing good for business or not. It keeps fluctuating and needs keen concern.
Let’s know how to calculate CAC and how to analyze it for making the best of it.

How to calculate CAC?

CAC is the relationship between the marketing budget and the customers acquired through it. The least is the budget for acquiring each customer, the more it is profitable for the business. The calculation can be understood through this easy formula:

CAC: Marketing costs/ Customers acquired

For example:
A business has spent $1100 in a Facebook Ad campaign for some time and acquired 95 customers through it. Then the CAC will be the cost taken to acquire each customer, which is $11.57.

CAC: 1100/95 = $11.57 spent to acquire each customer

This is how customer acquisition cost is calculated and the success of CA is figured, but how? Let’s find out.

How to evaluate customer acquisition success?

The success of acquiring customers lies in gaining new customers with the least marketing budget and to leverage them into loyal customers. It’s obvious to spend least in doing so but it should also be noted that a business should never give up on marketing to new customers. This is what initiates a business and keeps it going.

It is about gaining the right customers who can loyally contribute to the revenue of the business. Although the success of CA depends on what strategy a business implies. An Ad campaign might continuously provide customers to the business, but it will also keep eating the marketing budget. The success of ideal customer acquisition exists in adopting channels that don’t take much but give long-lasting and sustainable results.

Thus, it is clear that the success of customer acquisition is directly proportional to the right channel and the right strategy adopted to do so. Every business has multiple choices of marketing channels and if used right, each one can contribute something at its best. This is where the strategy needs to be robust so that the business can smartly use those channels and methods which cost less and give more customers, consistently.

So, if a business is acquiring customers from a channel by spending more than it could’ve achieved by spending less on another channel, then the customer acquisition may be running fine but it’s not a successful one. A business should be concerned about minimizing CAC and then only it can make the acquisition of customers—a success.

How to minimize CAC?

The growth of a business relies upon how much it earns with as little expenditure. It is crucially important to minimize CAC for doing so. Minimizing it isn’t a difficult task but a careful and strategic pursuit. If a business is worthy enough to engage customers to become loyal ones, then a controlled CAC is what it needs.

There are many ways to minimize CAC but the prominent ones are:

1. By adjusting and optimizing customer acquisition strategy
2. By figuring out the most beneficial channel (for ex: email marketing, social media, etc)
3. By improving website conversions
4. By boosting the value of existing customers

All of these ways help build a strong customer acquisition strategy that can help to reduce costs and give better results. Although, it depends on how good are these aspects analyzed to get the desired results. It is important to know what customers are interested in, what channels they prefer, how they respond to campaigns and how they behave in overall towards your business.

Enalito is one of the best-in-industry AI/Machine Learning powered tools that can easily, reliably and accurately does all this for you. It seems like a fairytale promise, but it can indeed track customers’ behavior and serve with all the analytical help you need to grow your business. Let’s know how Enalito helps in customer acquisition with the least cost and best profits.

What Enalito does?

Enalito is an all-in-one solution for all eCommerce business needs, but for now, let’s turn the spotlight on what it does for new customer acquisition while minimizing the cost and contributing to the success of the business. It analyzes the store data and represents which customer is behaving how in terms of visits, purchases, and response to campaigns and promotions.

This innovative product suite fetches the customer and product data from the store and gives detailed and crucial insights into the business performance. As far as acquiring customers is concerned, the dashboard provides three different sections of graphs which show the Digital spend (money spend to acquire new customers and leverage existing ones), new buyers cardinality (to show the number of new customers gained through the digital spend) and the repeated buyers cardinality (to show the engagement of existing customers through digital spend). All these sections show two graphs each: one to show month-wise ‘Change in trend’ and the other to show month-wise ‘Trend’ (or difference in digital spend, new customer cardinality and repeated buyers cardinality).

Enalito’s AI-powered analytics reads the overall data and provides the best solution suggesting which campaigns perform the best, which channel gives the best customers, how many new customers are acquired each month and how many of the existing customers are turning loyal and at what rate. The tool delivers the Customer 360-degree view and represents the true business status. It provides exceptionally useful insights that can help in reducing marketing costs by making fruitful decisions based on accurate and real-time analytics.

If you are looking to acquire new customers at least budget or looking to leverage the Customer Lifetime Value (CLTV) or simply want to create campaigns that can make the visitors buy, then Enalito is the home for your every solution.

Enalito excels in providing flawless analytical solutions for your eCommerce store and at a price that will prove negligible in comparison to the profits it can help you to make.  To know more about Enalito, explore through the website and its informational resources. You can contact here to book a demo to surf through and understand every single feature of the tool that can stimulate your business growth.