What is a Customer Acquisition Cost Formula

If you’re currently in the process of assessing your business plan and are interested in calculating your customer acquisition cost so that you can make wiser business decisions, you’ve come to the right place. Simply continue reading to discover how to use the customer acquisition cost formula to gain valuable information on your customer base. As information is power and the more statistics that you work out, the better-informed business decisions that you’ll be able to make.

What is a Customer Acquisition Cost Formula?

If you’re keen to work out your customer acquisition cost you’ll need to use the customer acquisition cost formula which will tell you on average how much it costs your business to acquire a new customer. For example, your business may need to invest in paying for paid Instagram ads or Facebook ads in order to acquire new customers. Instead of calculating your customer acquisition costs on a single occasion, it’s a wiser idea to recalculate your business’ customer acquisition cost at least twice a year as increasingly digital marketing costs are rising and as a result, your customer acquisition costs may rise.

For example, if you rely on Facebook ads to reach your target audience and to drive traffic to your online shop, if Facebook ads increase in cost, so will your business’ average customer acquisition costs. So it’s a great idea to track changes in your customer acquisition costs over time.

Are there any other metrics that are important to work out?

Yes, as well as working out your customer acquisition cost formula, it’s also a great idea to work out your customer lifetime value. Which is the amount of revenue that your business’ average customer will bring in over their entire life. While it’s a great idea to work on decreasing your customer acquisition cost, it’s also well worth working on increasing your customer lifetime value. In order to increase your business’s long-term profits.

One way to increase your average customer lifetime value is to work on retaining your current customers by sending well-thought-out marketing emails to all of the individuals that have purchased products or services from your online business in the past year. Or who have elected in order to sign up to your business’ marketing list, in exchange for a discount off their first purchase with your business. In general, one of the first steps which you should take is to promote your business’ mailing list. As the more individuals that are on your mailing list, the more likely you’ll be to make sales through the links which are contained in your marketing emails.

Are you ready to take your next step?

So if you want to make crucial changes to the way that your eCommerce business operates and want to increase your business’ profits and the number of repeat customers which your business attracts, it’s well worth figuring out both your customer acquisition cost formula and your customer lifetime value. Especially if you want to help your eCommerce business thrive and to get the most value out of each of your business’ customers.

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