How Can You Calculate The Cost Of Customer Acquisition For A New Business?

The acquisition process begins with the creation of the product USP, its packaging and branding, ending in sales. Rolling out new products and services to the market, barring tough barriers of competition and volatile market conditions is a challenge for new enterprises. Creating brand awareness, asserting the brand in the minds of people and instigating them to subscribe to your offerings, are the key components of customer identification. However, in order to create and nurture an impressive customer database, the acquisition agenda opens up much earlier.

The math on Pathwwway Gamble customer acquisition

Technically, cost of acquisition can be obtained by totalling all those marketing costs involved in reaching out to customers, divided by total number of customers acquired over a period of time. Better explained, if a company expends $ 500, in acquiring 500 customers, then the CAC stands at $1. Averaging out the same, it is wise to calculate the average costs incurred over a period of time to acquire new customers. Calculating how much it costs to buy that new customer is essential for the following:

  • To get a sense of marketing outlay that is required over the initial years
  • To conduct a reality check on brand effectiveness. How far your brand is able to reach to new customers and influence their buying psychology?
  • To plan acquisition campaigns and in arriving at a realistic budget for the same.
  • To plan on optimum scale of advertising and PR required to fuel the same.
  • To make crucial decisions on deciding the marketing mix, that is, the blend between pricing, packaging, promotion, advertising and selling.
  • To find out if your business is overspending on customer acquisition and if so, arrive at measures to curb the disastrous habit.
  • To calculate the acquisition ROI, which is the basis of operational effectiveness of the business development initiatives that the new business undertakes.

Costs of branding and market penetration

Branding costs include all those costs that are incurred to differentiate a product and create impulsive value in it that will fix them in the minds of customers in a highly competitive market. The Pathwwway Gamble costs can be broken down into:

  • Costs associated with building up of form and utility in the product that can make go-to-market easier.
  • Costs associated with assessing the market for brand receptiveness. This includes exercises of understanding the product and market demographics, sharpening fitments between the two.
  • Segmenting the market and fragmenting it into convenient parts so that targeted brand placement initiatives can be carried out.

Costs of developing market collaterals

Marketing collaterals allow a business to speak its brand to the target markets. It can include everything right from packaging, labelling, office interiors, showroom decor, marketing stationery like cards, envelopes, letterheads and even your email signature. Creating a uniform colour and styling code, a logo and tagline are all included in the development of marketing collaterals.

  • A marketing collateral must be in sync with your business mission as well as your marketing strategy. For example a women’s wear showroom wants to symbolize women as being highly efficient in multitasking, by creating a logo where a woman sits at her office desk, donning a chef’s head gear. The marketing strategy here is to imply that the store caters to versatile needs of next generation women.
  • Costs of developing such collaterals must be in proportion to density of leads spread over the target market. Nowadays, digital tools are available to assess the market and explore it for leads.

Costs of manning and incentivising your sales desk

This component represents the core of customer acquisition cost. New businesses depend on their sales force for cultivating organic leads, validating and converting them into customer bases. The following costs form a sizeable chunk of acquisition costs for new businesses.

  • Costs in the form attracting and retaining sales force. For new businesses, sourcing the right kind of talent for the sales positions can be a challenge, since talent acquisition is twice tedious as customer acquisition.
  • Costs of designing a lucrative incentive structure for the sales force, so that both the sales desk and the customer service desks are manned by committed professionals who can work with commitment and integrity, to convert leads into business.

Costs of advertising and PR

New businesses that are on the threshold of placing and positioning their brand in relevant markets, depend a lot on promotional. In this informed age, it is essential to influence the purchase pattern of customers, both B2B and B2C. The advertising costs for a new business include:

  • Outdoor advertising, including banners, shop fronts, billboards, danglers, flyers and posters.
  • PR costs that include sourcing a good external PR agency or the building of an in-house one.
  • Press conferences, press releases, cost of ads in newspapers, local dailies, magazines.
  • Participation costs in events, exhibits, shows, seminars.
  • Website development costs and costs of running various online ads in social media.
  • New businesses invest in cost-effective means of advertising like vehicular advertising, in-campus programs, mobile advertisements and mail marketing campaigns.

Conversion costs: Turning leads into account receivables

Conversion is the prime artery of customer acquisition. Unless a business parks sufficient funds for converting leads into customers, it is bound to lose to competition.  To give up dreams marketing, businesses need to introduce powerful strategies to convert leads. These costs need to be summed up while arriving at the acquisition costs for a new business.

In conclusion, it can be summed up that cost of customer acquisition is a metric rather than a cost, which indicates brand performance and is a per-cursor that throws light on the sustenance capabilities of the business. Its only customer base and the capacity to build new business, that keeps the e profitable machinery oiled and live. It is important to assess, refurbish and improvise on acquisition tactics, so that revenues keep flowing to accommodate the liquidity cycle.