3 Reasons Your Customer Acquisition Cost Benchmark Matters

1) Your Customer Acquisition Cost Benchmark Will Impact Your Revenue

Simply put, if you are spending too much on acquiring each new customer, you are losing part of your net revenue. Making a sale is always a positive for businesses. And yet, after taking a look at all the money you've spent, you may see room for improvement. After all, there are only two ways to increase revenue: cut spending or increase income.

Obviously, your customer acquisition cost benchmark isn’t the only thing that impacts your net revenue. You have to consider all of your business expenses to decide on any major changes. This includes monthly bills and operating costs. If you find that you're acquiring customers but you still aren’t reaching your revenue goals, you may need to find less expensive ways to acquire them. For example, are you still relying on cold calling for marketing? Digital marketing is cheaper and more effective.

2) Your CAC Reveals the Effectiveness of Your Lead Nurturing

Leads are exciting, and generating more of them is the goal of every marketing team. But if you’ve been hanging onto a lead for years and they still haven’t become a customer, you may be spending too much time and money to nurture them. In the event that one of your leads is just leading you on, it might be wise to abandon them. This won't happen often. The more likely culprit is the way in which you nurture your leads, however.

If you aren’t following up on leads effectively, they can't become customers. You’ve spent time and money on marketing to turn them into a lead. Not every lead will convert, but you want a large enough proportion to purchase to maintain a good ROI.

If you already have processes in place to nurture reads, you may need to reevaluate them and make some changes. Sit down with your team and hash out a plan that you can all conform to. Create email workflows to respond to leads effectively. Use a system to track your leads and score them. You can even send them exclusive marketing materials by segmenting them into categories.

Keeping track of all of your leads can be taxing without the right tools. Software offered by companies like HubSpot can help you manage all of your contacts efficiently through marketing automation. As a result, all of your leads will be a single workspace, you can reach out to leads on a strict schedule and keep them moving in the buying cycle. Sometimes these types of tools come with a price tag. In the long run, though, marketing tools will help you save time and money and be able to better manage your customer acquisition cost benchmark.

3) Your CAC Reveals the Effectiveness of Your Marketing

Unfortunately, there is such a thing as bad marketing. If you aren’t using the best strategies for your business, you may be throwing money away on ineffective ads and marketing campaigns. If you are spending exorbitantly on marketing but you aren’t gaining many new customers it might be because you’re investing in the wrong types of marketing or marketing over the wrong channels to get new customers.

Across the globe, marketers agree that some channels are best used for customer acquisition and others are best used for customer retention. For example, if you’re trying to market to acquire new customers, it’s better to focus on the following:

• Paid Search Marketing
• SEO and Natural Search Marketing
• Mobile Web Marketing
• Online Advertising
• Blogging

Although paid search and online advertising were named most effective, they cost more than other forms of digital marketing. If you’re on a tight budget or you are trying to lower costs, you can focus on “free” digital marketing efforts like blogging, SEO, and other types of content marketing.