Previously, we started to dig deeper into each critical business insights for startups or SMEs alike and I shared about 3 ways to get a Monthly Recurring Revenue or MRR.
Now, let’s learn the next critical KPI which is called Customer Acquisition Cost or CAC.
Customer Acquisition Cost (CAC) is the total cost that a business incurs in order to acquire a new customer. It is calculated by dividing the total sales and marketing expenses associated with acquiring new customers by the number of customers acquired during a specific period of time.
There are several ways that businesses can reduce their CAC:
- Optimize marketing efforts. By identifying the most effective marketing channels and tactics, businesses can reduce their CAC by targeting their efforts more effectively and efficiently.
- Offer incentives. Offering incentives, such as discounts or free trials, can help to attract new customers and reduce the cost of acquiring them.
- Leverage word-of-mouth marketing. Word-of-mouth marketing can be a powerful and cost-effective way to acquire new customers. Encouraging satisfied customers to refer friends and colleagues can help to reduce CAC.
- Increase customer lifetime value. By increasing the value that customers get from a product or service, businesses can justify higher CACs, since the customer is likely to remain with the business for a longer period of time.
- Improve customer retention. Retaining existing customers is often more cost-effective than acquiring new ones, so improving customer retention can also help to reduce CAC.
To get CAC, businesses need to track and measure their sales and marketing expenses and the number of customers acquired during a specific period of time. It is important to continually monitor and optimize CAC in order to ensure that it is as low as possible while still allowing the business to grow and thrive.
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The content was generated by ChatGPT, a large language model developed by OpenAI. The responses generated by the model are not the original work of the author and are intended for informational purposes only.