Marketing and sales is a massive investment, rightfully of course. There's so much that goes into it from top of funnel activities like blogging and SEO to bottom of funnel activities like conversion path optimization. How do we measure the efficiency of our sales and marketing teams? We have to determine our Customer Acquisition Cost.
CAC is only one of those super useful marketing metrics out there. This one pretty much calculates how much a company spends to acquire new customers.
To calculate this formula, you'll need two things:
Sales and marketing costs: program and advertising spend + salaries + commissions and bonuses + overhead in a month, quarter, or year
New customers: number of new customers in a month, quarter, or year
Formula: sales and marketing costs / new customers = CAC
Why does my Customer Acquisition Cost matter?
This formula provides great insights into the efficiency of your sales and marketing teams. Making sales is what fuels your business, so each one is important. But what did it cost to actually get the sale? Your CAC directly impacts your revenue.
You can also dig deep into how your marketing team nurtures leads. Are they pushing the right content to the right people? Are they searching the right places? If they are spending time looking in the wrong places or creating content that doesn't speak to your audience, you're spending more money to acquire customers than you need to.
How to improve your Customer Aquisition Cost
So let's say that your sales or marketing team isn't as efficient as they could be. There are a bunch of areas to think about.
- Is your team targeting the right customers?
- Which marketing/sales methods seem to be the most and least successful?
- Which channels are the best for reaching potential customers and which can we save some time on by skipping?
- How are your PPC campaigns doing? How can they improve?
Just take a look at your analytics and you'll know where your problems are. From there you can take on each piece either one by one or all at once.
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