How do I know if my client acquisition costs (CAC) are too high? How can I lower my CAC?
Client Acquisition Costs
What are your client acquisition costs? Two ways to measure CAC are:
- As a percentage of sales revenue.
- Per client or customer.
Add your marketing and sales expenses and divide by sales revenue or the number of new clients to calculate these measures.
Benchmarks
Available studies qualify CAC estimates and present broad ranges such as:
- Professional Services: 10% – 30%
- E-commerce/Online Retail: 5% – 15%
- Software/Technology: 15%-30%
- Consumer Goods: 10%-20%
What is really important is lifetime value!
Lifetime Value (LTV)
What you spend to acquire a new customer depends, in part, on what you sell. Answer these questions:
- What will you spend to acquire a 1 time, $5,000 customer?
- What will you spend to acquire a 5-year contract at $5,000 per year?
The 5-year contract has a higher LTV enabling the seller to spend more with a lower CAC.
How To Lower My CAC?
The lower the CAC, the higher the profit. Great ways to lower CAC using your CRM are:
- Precise Audience Focus – Spend time with your Very Important Prospects (VIPs). Devote marketing energy to the channels frequented by your VIPs to reduce time spent on irrelevant leads.
- Segmentation – Organize contacts by demographic, industry, buying behavior, and preferences so that messaging is specific and appealing.
- Sales Funnel – Track leads, see where prospects drop off, engage with prospects at each stage, and reduce your sales cycle’s duration.
- Marketing Campaigns – Set up emails and texts, sent automatically educating, nurturing, and leading your prospect to purchase. Send campaigns to different segments based on pre-conditioned factors.
- Automated Reminders – Set up automated actions to owners, sales managers, and salespeople to follow up immediately after emails are sent.
- Referral Programs – Manage to whom and from whom referrals are passed.
- Customer Retention – Engage with customers after their purchase with educational content that leads to reorders.
Precise, automated, engagement enables you to allocate time to your VIPs while managing your sales team.
Bottom Line Impact
Analyze where your CAC is for your industry based on the ranges above. Use your CRM to:
- Spend time with your VIPs by rating prospects
- Market to the channels that your VIPs frequent.
- Segment your contacts and tailor messaging.
- Track prospects in a sales funnel, and trigger outreach based on their stage.
- Analyze who drops off when.
- Automate outreach to segments based on your criteria
- Build personalized email templates for repetitive emails.
Let your CRM help add profit to your business!
Reducing CAC requires a multifaceted approach including precise targeting, data-driven insights, and customer-centric strategies.
Let Me Know How You Lower Your CAC
