Online companies recognize that there are numerous E-commerce indicators they should be aware of if they wish to grow their business. But one particular statistic and expense stands out over other hands. This is the typical cost to acquire a new customer!
Companies can evaluate how different marketing strategies can benefit them by understanding the cost of acquiring customers in India. They could determine their revenue expenditure and pinpoint the potential risks and challenges.
Calculating the cost of acquiring a client can help you know the direction of your funds and show how much profit margin you must make to succeed.
What is the significance of CAC?
Understanding the average purchase cost in e-commerce The cost of acquiring a customer in e-commerce or any other field is crucial since these costs can make or break your business. Additionally, once you’ve got an existing customer, you must be determined to keep them. It would be a waste of money otherwise.
According to research, getting an additional client can be five 25% more costly than keeping an existing client. However, it is crucial if your business is beginning its journey. Therefore, it is essential to be aware of your expenses so that you don’t go over budget.
In addition, the acquisition of customers is a continual process. Every company is always looking for new customers. However, they could shift their focus away from the acquisition phase and instead focus on retention to increase sales from their existing and long-standing customers.
How can you determine the cost of the cost of customer acquisition
There are many options for determining the purchase cost for customers, So you’ll need to decide which one works most effectively for your company.
The typical Customer Acquisition Cost Formula
CAC = Marketing and sales costs or the number of new customers
This is the standard cost to acquire a client formula that is used by a majority of businesses. For the calculation of CAC, you must divide the sales and marketing expenses during a specified time (for instance, a month, quarter, or one year) by the number of new customers you acquired in that time.
Cost of acquiring a customer on average for e-commerce
It is inevitable to invest in developing customers if your e-commerce store is just beginning. But, as you battle to keep customers in the long run, you’ll be able to lower the cost of acquiring an additional customer for your online business.
In e-commerce and online sales, acquiring customers often requires the use of different methods of marketing or platforms. This could comprise paid search engine advertising (SEM), social media marketing, content marketing, email marketing, and SEO. (SEO).
Automating your online purchases, particularly marketing automation, aids entrepreneurs or managers in speeding up their marketing processes and is utilized in many of these strategies for marketing.
Average cost of customer acquisition by the industry
It is only natural that this figure differs from industry to industry since diverse items could have different CACs.
The cost for a new client, divided by industry according to the following:
Travel: $7
Retail: $10
Consumer Goods: $22
Manufacturing: $83
Transportation: $98
Marketing Agency: $141
Financial: $175
Technology (Hardware): $182
Real Estate: $213
Banking/Insurance: $303
Telecom: $315
Technology (Software): $395
What is the average cost of acquiring a new customer?
A perfect Customer Acquisition Cost depends on the business type and methods employed. But comparing your CAC with Customer Lifetime Value is an effective evaluation method (also called LTV). LTV examines the amount of money the client will contribute to your company throughout their relationship with you. What is a good CAC ratio? The optimal LTV ratio to CAC ratio is thought to be 3:1.
Conclusion
It takes time to gain new customers. Acquisition of new customers is the initial step when you’re only starting. The other factor is retention.
As you continue to retain customers, you’ll also look for new customers, whether for new products you’re offering or to increase your client base. Equally, calculating the acquisition cost for each client within your e-commerce company will ensure that your company is moving forward rather than backward.