To count the price of a one moving lead, firstly, we have to understand what is CAC (Customer acquisition cost)
Customer acquisition cost (CAC) is the total amount spent on attracting one new customer.
To calculate the CAC using the following formula:
САС = Sum of all expenses/number of customers managed
Technically, the formula is correct. However, most marketers use the advanced formula to calculate CAC:
To get the most accurate result, calculate CAC separately for each sale channel. This makes it possible to understand which of the channels has the lowest CAC and where specifically it is worth increasing marketing investments: the more of the budget you allocate to the channels with a low cost of customer acquisition, the more users will be acquired without increasing the total cost.
To see how the full formula works, we apply it to the example of a local Boston moving company
We accept 0.3(30%) as a coefficient of a successful lead converting to a confirmed customer
To begin, we write down all the initial approximate data for the calculation (for 1 month):
Traffic from search advertising | 100 clicks |
The price per click is | 15 dollars |
Salary to the PPC specialist | 300$/m |
Organic Search (SEO) traffic | 200 clicks |
Salary to SEO specialist | 600$/m |
Software for Moving Company | 125$/m |
Visitor to customer conversion (ads + SEO) | 30% |
New customer out of ads 100 * 0.3 = | 30 |
New customer from organic search 100 * 0.3 = | 30 |
Repeat customers | 5 |
Total moving requests | 65 |
When the list is completed we are able to count the approximate price of the moving lead in Boston using our CAC formula:
Marketing Expenses = 100*$15 (Ads) + $0 (SEO) = $1500
Salaries = $300 (Ads) + $600 (SEO) = $900
MovingCRM = $200
Total expenses = $2600
We always have some overhead expenses, so we are adding extra 10% = $2600 + 10% = $2860
Then we want to count CAC separately by channel:
Expenses on Moving CRM we are going to count equally spreading to each channel
Traffic from search advertising | 100 clicks |
The price per click is | 15 dollars |
Salary to the PPC specialist | 300$/m |
Software for Moving Company | 125$/m |
New customer out of ads 100 * 0.3 = | 30 |
CAC (100*15+300+125) / 30 = $64.1
Organic Search (SEO) traffic | 200 clicks |
Salary to SEO specialist | 600$/m |
Software for Moving Company | 125$/m |
New customer from organic search 100 * 0.3 = | 30 |
CAC 666 / 30 = $22.2
Purchase Leads | 100 leads |
Price per Lead (average) | $20 |
Salary to the PPC specialist | 100$/m |
Software for Moving Company | 125$/m |
New customer out of ads 100 * 0.4 = | 40 |
CAC (100*20+100+125) / 40 = $55.6
Summary
Each new moving customer costs the moving company $62.2 through search advertising, $22.2 from organic search, and $54.1 using aggregate resources such as Yelp, Thumbtack, etc…
Once this data is in your hands, you can think about how to reduce CAC. To do this, you can optimize the sales funnel, increase the effectiveness of marketing in general, develop inbound marketing, and more.