SEO vs. PPC: When to Optimize and When to Pay for Traffic
Acquisition. - 5 minute read
Acquisition. - 5 minute read
A lot of startups think that marketing costs (MC) only include the costs of social ads, targeting, and campaigns. But it’s a big misconception. Marketing costs also include the variable costs of things like manpower, outsourced services, hosting platforms, software subscriptions, and more.
Here’s an equation that takes into account a broader understanding of marketing costs:
CAC = (MC + W + S + OS + OH) / CA
CAC = customer acquisition cost
MC = marketing costs
W = wages for marketing and sales
S = marketing and sales software
OS = outsourced services
OH = overhead for marketing and sales
CA =customers acquired
Many startup giants like Dropbox, Slack, and Invision work on a freemium business model – offering free basic services, along with a tempting range of premium offerings. While offering a great opportunity to build trust and engage with their customer base before funnelling them towards an upgrade, these models require a slightly different CAC model.
Since the free offering is an embedded part of the customer acquisition process, it’s important to consider the costs of engineering, research and development, and support involved in maintaining the free service.
Though it may seem obvious, it’s important to remember that you’re always aiming to have your CAC stand significantly lower than your customer’s lifetime value (LTV). Sure – you might be attracting a lot of new users through free trials, social media posts, and engaging content, but you won’t be profitable if none of them actually pay for your product or service.
ReferralCandy has found that consumers are up to 50x more likely to purchase a product if it’s recommended by close friends, family or influencers. Luckily, 90% of those customers also trust word-of-mouth referrals.
Since referred customers are usually considered to be warm, qualified leads, your CAC will be $0 once they convert. With those kinds of numbers, referred customers will help decrease your CAC over time, so start considering ways you could incentivize and implement a referral program of your own.
One of the most organic ways to improve CAC is to enhance tangible user value. This could mean increasing LTV by offering new products, features or add-ons that customers actually want, or creating new customer experiences that genuinely help and delight.
One of the simplest ways to generate ideas for added-value initiatives? Dig through your aggregated feedback. Find out what your startup’s missing, and then focus on filling that gap.
There is no shortage of marketing blogs promoting the value of CRMs. And though you may be dubious about their benefits, there’s no denying that having an agile team of salespeople efficiently responding to customer queries and issues can go a long way in improving your customer acquisition rate and customer lifetime value.
In fact, a study by Innoppl Technologies found that 65% of sales reps who have adopted mobile CRM platforms have reached their desired sales goals, while only 22% of reps using non-mobile CRM solutions have hit their targets. So as you take a bird’s-eye view of your acquisition process, try to understand whether your team would benefit from additional context, communication, documentation, speed, and automation. If so, it may be time to start shopping for a CRM.
Make sure you set goals in Google Analytics and create high-converting landing pages through multiple rounds of A/B split testing. You can also boost on-site conversion stats and reduce your abandoned cart numbers by making sure your entire purchasing process is fast, secure, and easy.
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Article written by Monique Danao