Customer Acquisition Cost (CAC),

Why It Matters 👇

You know exactly what Marketers love to talk about no it’s not our coffee orders we LOVE to talk numbers.

(Okay maybe not, I’m on a big hemp milk hot latte kick now but to be a successful Marketer we need to be data savvy.)

We NEED to talk numbers, more specifically we need to talk about the ones that can make or break our Marketing strategies.

And the 2 that stand out most to me are likes and comments on social media, JK.

Today we’re talking about Blended CAC and CAC per Channel.

Back when I was running a Marketing Ops department (at a unicorn SaaS brand), I had to monitor these metrics EVERY SECOND of EVERY DAY. Why? Because these 2 data points reveal how efficient your Marketing efforts are, both from a channel perspective and an overall Marketing perspective. 

And the best part about them? They don’t lie. The numbers never lie. Even if you feel like you’re being efficient, trending in the right direction, if the numbers don’t show that, then you need to re-evaluate your efforts.

But before I die on that hill, I need to get something off my chest. I see so many brands (and have been a part of brands) who ONLY focus on CAC per channel. That is a big mistake.

The reality is that the channels you could be hyper-focused on are being influenced by other channels.

If you’re spending heavily on branded keywords on Google, you need to ask yourself where those searchers first heard about your brand. It could’ve been from a podcast ad, Facebook ad, or even word of mouth. But if you’re only looking at that single channel of branded keywords, you might mistakenly think branded search is dominating.

I don’t blame anyone though, Marketing budgets are highly scrutinized right now and the pressure from leadership to be able to attribute every single dollar is making it hard NOT TO use the channels with the best tracking, AKA performance channels like Facebook ads and branded keywords.

But this can cause a siloed approach that might allow us to miss what’s actually driving the most results.

And that’s why I’m writing today’s email LOL, to help you avoid missing out on the bigger picture.

👀 The Big Picture: Blended CAC

Blended CAC is a data point you need to know as a Marketer at all times of every day. It’s the cost to acquire customers through both paid and organic channels, it will give you a holistic understanding of your overall customer acquisition strategy’s efficiency. Just honing in on paid channels severely overlooks the impact that organic channels have, and you know me I LOVE organic channels, so I love Blended CAC as a means to understand my strategy’s efficiency.

Calculating Blended CAC…

Total Marketing Spend: Include costs from all channels (paid ads, content Marketing, SEO, social media).

Total New Customers Acquired: Count all new customers acquired through these efforts in the same period, emphasis on THE SAME PERIOD.

Formula:

^ (I wish I was this buff but that’s for another day)

Let’s say you spent $10,000 on an omni-channel campaign last month. You ran Facebook ads, you put up a billboard downtown, and posted 6 short form organic videos.

And you acquired 100 new customers. Your Blended CAC would be $100.

Wait why does Blended CAC matter?

Comprehensive Performance Insight: Blended CAC combines ALL Marketing efforts, providing a more accurate picture of customer acquisition efficiency. Eliminating the likelihood of focusing on the wrong data points.

Strategic Allocation: Helps in identifying the cost-effectiveness of organic versus paid channels, making it clearer when budget decisions come around.

Risk Management: Allows you to take Marketing risks without over-investing, ensuring balanced spending across various channels, and eliminating the massive swings of budget that happen when the macro environment is not friendly.

👀 CAC Per Channel: Diving Deeper

CAC per channel breaks down the customer acquisition cost by each specific Marketing channel, such as social media, paid search, and email Marketing. 

Calculating CAC per channel…

Channel-Specific Spend: Total costs associated with a specific Marketing channel.

Channel-Specific Customers Acquired: Number of new customers acquired through the channel you’re focused on.

Formula:

Last month you were running a promotion and you spent $5,000 on Facebook ads. The creative you used was SO good and you acquired 100 new customers, making your CAC per channel (in this case Facebook) $50. 

While running Facebook ads you also ran an email campaign, sponsoring a few newsletters in your niche for $5,000. And through that you acquired 17 new customers, making your CAC for this channel about $295.

And because you’re looking to be efficient with your Marketing spend, which channel will you double down on? It’s a no brainer, Facebook ads, the CAC is 6x cheaper.

Why does CAC per channel even matter though??

Channel Performance Insight: Identifies the most and least efficient Marketing channels. 

Optimization Opportunities: Helps in reallocating budgets to high-performing channels and optimizing or discontinuing low-performing ones, EFFICIENCY.

Targeted Strategies: Allows for the development of more targeted Marketing strategies based on channel performance. Your entire approach can become tailored based through creative that fits each channel.