Let’s face it: Working in marketing comes with an endless list of metrics. There is an extraordinary amount of effort that goes into generating, measuring, and sustaining content to generate leads that may turn into customers.
Yet, despite our herculean efforts, the majority of our bosses think marketing programs lack credibility. Think about this: 73% of executives don’t believe that marketers are focused enough on results to truly drive incremental customer demand.
Customer Acquisition Cost (CAC)Almost three out of four bosses don’t believe your work is credible, and often it is simply because they are not hearing the correct numbers. This is where customer acquisition cost (CAC) comes in as a way to measure inbound marketing ROI.
What is it: The Customer Acquisition Cost (CAC) is a metric used to determine the total average cost your company spends to acquire a new customer.
How to calculate it: Take your total sales and marketing expenditures for a specific time period and divide by the number of new customers for that same time period.
Formula: Sales and marketing costs ÷ new customers = CAC
Let’s look at an example:
Sales and marketing cost (in a month): $30,000
New customers (in a month): 30
CAC = $30,000 ÷ 30 = $1,000 per customer
What this means and why this matters
CAC illustrates how much your company is spending per new customer acquired. You want a low average CAC. An increase in CAC means that you are spending comparatively more for each new customer, which can imply there is a problem with your sales or marketing efficiency.
Get the tools to bring credibility to your marketing efforts
As marketers, we spend our time looking at so many marketing metrics that we can easily lose sight of what is important to our C-suite executives. Site traffic, social shares, and conversion rates are still very much important to our jobs, but they will not resonate as well with your higher executives. They want to be blown away by numbers that will affect the bottom line, such as customer acquisition cost.
Learning to look at these and similar metrics can have the effect of an adrenaline injection. You know you work hard, I know you work hard, and with metrics as valuable as customer acquisition cost, your boss will quickly understand how hard you work as well.