The Customer Acquisition Game
Let’s cut through the jargon and dive straight into something crucial for your business: customer acquisition cost (or CAC.) Yes, it sounds funny, but it’s actually a pretty big deal. Let’s break it down.
The Basics of CAC
If you’re running your e-commerce store, or just starting out, you’re likely hustling hard to get those first sales. And you’re probably relying on organic efforts (like social media or word-of-mouth) to bring in customers. The good news? It doesn’t cost money! The bad news is, it does cost time. Potentially lots of it. And unless you’re a natural social media wiz…there might be a steep learning curve.
However, when you’re ready to kick things up a notch and scale your business, you’ll likely need to put some money into marketing, like ads. This is where the customer acquisition cost (CAC) comes into play.
CAC, in a nutshell: Ad Spend/New Customers
Imagine you spend $1,000 on ads this month, and you get 100 new customers. Your CAC is $10 (that’s $1,000 divided by 100 customers). This simple number is a game-changer.
Why CAC Matters
Why should you even care about CAC? Well, it’s like a reality check for your business. It reminds us that growth isn’t free. You might have been frustrated, wondering why your sales weren’t soaring. But now you know—it costs money to acquire each customer.
Knowing your CAC gives you power. You can compare it to different platforms like your website, Etsy, or Amazon. This helps you make informed decisions about where to focus your efforts.
Customers > Sales
Let’s shift gears a bit. Instead of solely chasing sales numbers, let’s talk customers. This is super important. Sure, you can sell more to your existing customers, but they likely won’t keep buying forever. Everyone has a limit. Eventually, you’ll need new customers to sustain growth.
Picture this: You’re looking at your sales numbers, and they’re good. You can boost them by selling more to your current customers, but deep down, you know you need fresh faces. That’s where focusing on customers, not just sales, comes into play.
Beware of Magical Thinking
Now, let’s talk about something that can sneak up on all of us—magical thinking. It’s when we set goals and create plans but forget about the nitty-gritty details.
You need to connect the dots between your goals and your CAC. Say you want to increase sales by $25,000. Awesome! But you can’t just wing it. You need a marketing budget that aligns with your goal. Don’t fall into the trap of thinking everything will magically fall into place.
How to Calculate Your Acquisition Cost
Ready to tackle your CAC? Let’s break it down in a few simple steps:
- Start with a significant timeframe, like year-to-date. Take your total ad spend, including platforms like Google, Facebook, and Instagram.
- Find out how many new customers you’ve gained in that timeframe. Divide your total ad spend by the number of new customers. Voilà! You’ve got your CAC.
Remember, this is just the beginning. To dive deeper into the nitty-gritty details and apply it to your business, grab our free downloadable workbook HERE [LINK TBD]
Putting It All Together
Now, it’s time to connect the dots. Let’s say your CAC is $14.69. That’s your starting point. If you want to boost sales by $25k, divide that by your average order value. This tells you how many orders you need.
But here’s the kicker: Not all of those orders should be from existing customers. You need new blood to keep growing. Adjust your marketing budget accordingly. In the end, you’ll have a clearer picture of what growth truly means for your business.
Figure out your cost of Acquiring with this workbook:
Want More Sales? You Might Be Missing These 3 Things: https://thesocialsalesgirls.com/want-more-sales-you-might-be-missing-these-3-things-episode-179/
The 10-Minute Checkup – A quick, 10-minute guide to understanding customer metrics and benchmarks: https://thesocialsalesgirls.com/a-10-minute-checkup-you-should-do-today-episode-157/
How to Have More Cash in Your Business: https://thesocialsalesgirls.com/how-to-have-more-cash-in-your-business-episode-164/
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