MQL VS SQL

What is CAC?

CAC, or customer acquisition cost, is the amount of money a business spends to acquire a new customer. This can include marketing expenses such as advertising and promotional costs, as well as sales and commissions paid to employees. It’s important for businesses to keep their CAC as low as possible, as it can eat into profits and affect the bottom line.

There are a few ways businesses can lower their CAC. One is by improving the effectiveness of their marketing campaigns. This can be done by targeting the right customers, using the right channels, and creating compelling messaging that resonates with potential buyers. Another way to reduce CAC is by increasing the efficiency of sales and marketing teams. This can be done by optimizing lead capture processes, streamlining communications, and automating tasks wherever possible.

Ultimately, businesses need to find a balance between acquiring new customers at a reasonable cost and spending too much money on marketing and sales efforts. By keeping track of CAC and taking steps to reduce it, businesses can improve their profitability and competitiveness in the marketplace.

How is CAC calculated?

Since CAC includes any marketing or sales expenses incurred in order to attract a new customer, there are many ways it can be calculated. One basic example is to divide the total amount spent on marketing and sales activities by the number of new customers acquired during a given period.

CAC can also be calculated using historical data to determine how much it costs your business when you acquire one customer in the past versus acquiring another

Why is CAC important?

The CAC is an important metric for businesses to track, because CAC can be a significant expense for many types of companies. Keeping CAC as low as possible helps ensure that businesses are spending their budgets wisely. Since CAC includes marketing and sales expenses, it’s important to understand how much these costs are before calculating CAC so you have an accurate CAC figure.

Since CAC is part of the customer life cycle, it will vary depending on the stage in which the business interacts with each individual customer. For example, when acquiring new customers through inbound marketing campaigns versus outbound campaigns, CAC will vary. The CAC calculation provides helpful insight into your company’s customer acquisition strategy by showing what happens during each phase of the customer’s lifecycle.

What are some common CAC calculations?

There are a variety of CAC calculations that businesses may use, depending on their specific needs. Some common examples include CAC per customer, CAC per sale, CAC per lead, and CAC payback period.

By tracking these different metrics, businesses can get a better understanding of how efficiently they’re acquiring new customers and make necessary adjustments to ensure that CAC remains as low as possible.

How can CAC be reduced?

There are various ways for businesses to reduce CAC, including optimizing marketing and sales strategies, improving the customer experience, and increasing the lifetime value of customers. By taking steps to improve these areas, businesses can reduce the amount spent on acquiring new customers and improve overall profitability. Here are 15 Tips to lower CAC:

15 Ways to Lower CAC

Use Intent Data – Intent data is a form of data that helps marketers understand the ‘why’ behind a purchase. It can help you better target your ads and understand what types of content people are looking for before they make a purchase. Companies like Visitor InSites offer services that can help you collect and use this data.
Keep a close eye on your customer acquisition channels – It’s important to track where your customers are coming from so you can focus more money and energy on the channels that are performing the best. If most of your customers come from Facebook Ads, for example, then you’ll want to allocate more of your budget towards running ads on Facebook. You may also want to experiment with other social media sites or even paid search engines.
Optimize your website for better conversions – Your website is often the first impression potential customers will have of your business so it’s important to make a good one. Take some time to really optimize your website so it has the best chance of converting visitors into leads. If necessary, consider hiring a professional web designer to help you.
Offer more incentives to increase conversions – People are much more likely to buy from you if they can get something extra out of it. Maybe offer them something for free in exchange for their email address that way you can continue building a relationship with them and contact them about other offers down the road when they’re ready. It could be an eBook or some sort of webinar where you give away information related to the purchase they’re considering making.
Retarget people who abandon carts or hits on certain pages – Another strategy is to use retargeting ads (AdWords or Facebook Ads) to target people who are already familiar with your brand. These are the people most likely to purchase from you the next time they’re ready. You can use a service like Perfect Audience or AdRoll.
Launch an affiliate program – If you have a decent customer base, consider launching an affiliate program so other business owners can help spread the word about your brand. This is typically less expensive than advertising yourself so it’s worth looking into if there are businesses out there whose values align with yours.
Track every marketing dollar being spent – Since most companies don’t have unlimited funds, you need to know where all of your money is going. This way you can make more informed decisions on where to allocate your resources in order to see the best results. There are a number of different tools out there to help you do this, like Mixpanel, Kissmetrics or Heap Analytics.
Try using video content – A fairly recent study showed that including video on a landing page can increase conversions by 80%. If you’re not currently using video as part of your marketing mix, now might be the time to start. You don’t need to invest in expensive equipment or software. Services like Wistia or Vidyard offer great options for businesses of all sizes.
Test, test, and test some more – The only way to really know what’s working and what’s not is to test different strategies. Try out a new tactic and see how it performs. If it doesn’t work, quickly move on to something else. The key is to be agile and always be adjusting your approach based on the data you’re collecting.
Don’t give up – It can be frustrating when things aren’t going the way you want them to, but don’t give up. Keep trying different things until you find a strategy that works for you. There’s no one-size-fits-all solution so you’ll likely have to experiment a bit before finding what works best for your business.
Find the key moments where you have higher conversions – Start by finding places in your sales funnel where people are dropping off. They may not be converting properly or they may just not want to continue with the sales process at that point so you can’t blame them for bailing out early. You might want to rewrite your copy around those areas because maybe it’s just unclear what you’re offering or what value they’ll get from doing business with you instead of your competitor. If your website isn’t mobile-friendly, that’s another place you could see a drop-off so make sure to address that as well.
Follow the 80/20 rule – The 80/20 rule, also known as the Pareto principle, states that 80% of results come from 20% of efforts. In other words, focus on the things that are going to have the biggest impact on your business. There are a number of different ways to apply this rule, but it’s a good reminder to always be targeting your efforts in the right places.
Use Social Proof – Social proof is a psychological phenomenon that occurs when people are influenced by the actions of others. In other words, people will be more likely to do something if they see that others have done it as well. You can use social proof in your marketing by including testimonials from happy customers, displaying customer numbers, or using authority figures in your industry.
Make it easy for people to buy from you – One of the main ways to lower CAC is to make it easy for people to buy from you. This means having a well-designed website, clear pricing information, and an easy checkout process. If there are any steps in the buying process that seem too complicated, you’re going to lose a lot of potential customers.
Use a SaaS CRM – A CRM, or customer relationship management system, can be invaluable in helping you collect information about your best customers and find new ones to add to the fold. There are a number of different CRMs out there so it’s important to do some research before choosing one that matches your needs.

Lowering customer acquisition cost (CAC) is critical for any business, regardless of size or industry. There are a number of different strategies you can use to bring your CAC down, but it ultimately comes down to experimentation and finding what works best for your business.

In general, you’ll want to allocate more of your budget towards running ads on Facebook (or other social media sites) and/or paid search engines. You may also want to experiment with other marketing tactics, like content marketing or email marketing.

CAC is an important metric to track and understand if you want to be successful in business. There are a number of things you can do to lower your CAC and improve your bottom line. By following the tips mentioned in this article, you’ll be on the right track to reducing your CAC and growing your business.