Monday, August 22, 2016

Calculating the Cost of Customer Acquisition

Do you know what it costs your business to acquire a new customer? If you don't, you should. Cost per acquisition, or CPA, can be determined as follows. We would suggest you calculate this on a yearly basis for each specific advertising or marketing campaign.

First, add up the costs of all the advertising or marketing campaign. These include design, copywriting, printing, insertion fees, mailing list, and postage. To this total, look at the amount of time you and your employees spent on the campaign and calculate a dollar amount for these salaries. To this figure, calculate your office expenses, including rent and utilities. You can calculate these costs for the entire year and then calculate what percentage of the year was spent on the particular campaign.

Now you should have a dollar amount for how much it cost to run a specific advertising or marketing campaign. Your next step is to determine how many customers you netted from the campaign. This will be difficult to do unless you have implemented a means to measure where your customers are coming from. This is easily done when it is an online response, but if you are running a print ad, you will want to code the offer in some way or make sure you ask customers how they found you.

To determine the cost per acquisition, divide the number of customers attained from the campaign by the total cost of the campaign. This will tell you how much money it cost you to acquire one new customer. Knowing this number will allow you to accurately determine whether or not you really are getting a return on investment.

In our next post, we will talk about the costs of customer acquisition vs. customer retention.

TechniGrafic Solutions, Inc.
Internet Marketing and Lead Generation
www.techsolinc.com