What is the cost of acquiring a new customer?

Izzy

January 23, 2015
2 MIN READ

Customer Acquisition Cost is the cost of convincing a customer to buy a product/service from your business.

This cost is inclusive of the product cost and the cost involved in research, marketing, and accessibility costs. In this post, you will find some tips on optimizing the cost of acquiring a new customer.

This is an important business metric. It plays a major role in calculating the value of the customer to your company and the resulting return on investment (ROI) of acquisition. The calculation of customer valuation helps you decide how much of its resources can be profitably spent on a particular customer. In general terms, it helps you decide the worth of your new customer to the company.

It doesn’t take a genius to understand that business failure comes when it costs your business more to acquire new customers than the lifetime value, which is the gross margin you expect to make from that customer over the lifetime of your relationship.

For example, according to Optimize Magazine, at one point, CDnow Online was spending about $40 to acquire each customer, although the average lifetime value of a customer was only about $25. The Optimize article suggests that it is not good business sense to spend more acquiring a customer than the amount that customer will net the company in return.

Failing to control the cost of acquiring a new customer can kill your business. To avoid this pitfall, your digital marketing program needs to be carefully planned and monitored. The costs can quickly get out of control if they aren’t monitored. In other words, you need to be certain that you are getting your money’s worth and that you aren’t paying more to acquire a customer than you are receiving in return.

To properly plan, implement and maintain an effective digital marketing program, it is vital to know how to calculate your customer acquisition cost and constantly monitor it.

Tips to lower your customer acquisition cost.

  1. Align your sales and marketing objectives and efforts to produce more sales-ready leads
  2. Tie every process in your business to revenue
  3. Drive through the customer’s buying journey
  4. Generate awareness of the value your product or services offer
  5. Automate your marketing efforts such as lead nurturing process
  6. Constantly measure and analyze your marketing efforts and spend time figuring out the causes of results
  7. Test & Analyze, A/B testing is a great way for doing this
  8. Revise, Improve and repeat
  9. Identify your buyer persona and constantly refine it by research and interviewing your customers.
  10. Identify and target key players (Influencers) that will influence your buyer's persona.

I hope I've managed to answer your question of what is customer acquisition cost? And I would love to know your thoughts and experience on how you calculate the cost of acquiring a new customer. Share your ideas in the comments below.

If you like this post, you might be interested in

Learn how to utilize every tool inside of your HubSpot.

Prepare your teams to take ownership of HubSpot and make the most out of your investment.
Start your onboarding
Izzy

My name is Izzy and I am a co-founder of CRM Toolbox, an award-winning HubSpot Solutions Partner. I lead our team of consultants who provide professional guidance to help businesses implement the HubSpot CRM platform migrate, integrate their tech stack to HubSpot to create a seamless environment for sales reps to use. There is nothing I love more than solving the challenges that come up when someone wants to migrate an old system or integrate their tech stack with HubSpot - it's like a puzzle!

Subscribe to our blog

The best information about inbound marketing, sales, guides and migrations.

Related Reads

6 CRM alternatives other than Salesforce

If you are looking for a CRM, you have probably come across Salesforce more than once. Being one of the most extensive CRM in the world, it ...

June 28, 2021
5 Tips to boost eCommerce sales

Adopting or improving an inbound marketing strategy can offer all sorts of value to an organization. The type of value, of course, can ...

May 18, 2018
This year i am a lion-ess-ish

I was fortunate enough to experience the Lions Bootcamp with David Weinhaus from Hubspot. I know, isn’t Hubspot just great! But, having ...

December 07, 2017
Dan Tyre's Pipeline Generation Bootcamp - Here's what I learned

We have been a HubSpot Partner Agency for about two-and-a-half years now. We just made it to Platinum tier–, and it's been one heck of a ...

August 12, 2017