You already know how expensive and laborious it is acquire new customers. Therefore, tracking metrics such as the CAC (Customer Acquisition Cost) is essential to know how to optimize and reduce this cost.
What is CAC?
O CAC represents the sum total of marketing and sales costs for acquire a customer — one of the most important metrics! After all, without customers, there is no revenue, and without revenue, there is no business.
Calculating the Customer Acquisition Cost, then, is fundamental to analyze whether a higher revenue is being generated than itsince there is a very close relationship between CAC and the company’s profitability.
How to reduce CAC?
Check out the best strategies to reduce CAC of your business!
1. Improve Your Website Conversions
You can generate immense traffic to your business website. But the question is, how many of those visitors are actually converting? Unqualified traffic doesn’t convert and without the conversion you’re throwing money away!
Monitor, test and improve your conversion rates is the safest way to reduce the Customer Acquisition Cost. Because? The more people you are able to push to the bottom of the sales funnel and actually convert them into customers, the lower your CAC. Does it seem obvious? And is! However, not everyone can do this correctly.
To accomplish this task, you can use a simple spreadsheet or use the one we made for you for free:
And a great way to measure your conversion rates is by the implementation of A/B tests on your website. For example, you can test different versions of CTA (call-to-action), buttons, colors, layout, images and many other elements.
2. Use the 80/20 rule
Also known as the Pareto principle, the 80/20 rule theorizes that 20% of your efforts are responsible for producing 80% of your results. In business, this can be applied in many ways! For example: 20% of your marketing projects generate 80% of your revenue.
Then analyze the acquisition channels of new customers: where did the customers who generate the most revenue come in? Organic search? Native advertising? discover and optimize your results!
Tip: How to measure and optimize Digital Marketing channels
3. Implement Ideal Customer Profile and Personas
When it comes to marketing your product or service, don’t shoot in the dark! Marketing actions need to be objective about who they should reach.
For that, you can use Pareto here again: 20% of your customers generate 80% of your revenue? In other words: use what you know about your 20% most loyal customers and use that knowledge to attract and retain a new audience!
Finding out who your ideal customer is and developing that persona is very important, because she is the one who will direct the entire marketing strategy and content of your business.
Just don’t confuse these techniques with target audience definition, which serves to segment your niche! persona is something much more specific: it is a semi-fictional representation of your ideal customer with name, profession, shopping habits and other data developed through research.
You can do this in several ways, but I recommend you use our process! It is available for free, contemplating the step by step, document and spreadsheet templates:
4. Reduce Churn Rate
if you really want reduce the CAC your business, you need to seriously think about reducing churn rate also! O churn rate and the lost customer rate by the company in a given period.
There is no logic in thinking exclusively about reducing the Customer Acquisition Cost without optimizing your loyalty — so you extract maximum revenue over time through new business with the same customerspaying their costs and generating more profits.
Therefore, reduce the churn rate is not directly related to CAC reductionbut it is an optimization of the results in revenue and profit generation for the company.
Tip: Increase customer retention through Customer Success
5. Do Inbound Marketing
For reduce the CACyou need be relevant for potential and current customers, and this can only be achieved through a strategy that attracts potential customers with the ideal profile, generates conversions, sales and delights customers, reaching after-sales.
O Inbound Marketing is a methodology that connects all the dots, integrating channels such as social networks, search engines and email, and optimizing ads and SEO, to expose your positioning and generate the desire to have your company as a supplier!
Traditionally, one sees great confusion in the Digital Marketing of companies: in each channel, a language, a visual and an isolated strategy, but the organization of these different factors, tools and channels, by themselves, already generates better results and reduces CAC! However, this is not the great beauty of Inbound:
Inbound Marketing implements Content Marketing with intelligence and, using the right content for each stage of the sales funnel, he can boost up to 7 times company conversions. This is a complex subject and, to delve into it, you should click on the following image:
The importance of calculating your CAC
As you can see, there are several strategies to reduce CAC and, in any of them, you need to make a consistent plan to achieve good results.
To help you, we created the CAC Calculator Worksheet! With it, you can calculate your Customer Acquisition Cost and plan how increase your profits!