The cost of customer acquisition is often contrasted with the cost of customer retention.. It allows you to calculate the ROI of marketing campaigns, highlighting profitable and less profitable practices.
We tell you everything you need to know about this important important KPI.
Customer acquisition cost: definition and calculation
To put it simply, the cost of customer acquisition corresponds to the expenses expenses incurred in all promotional campaigns. In other words investment needed to convert a prospect into a customer (by generating a lead). This average amount is used to define the amount needed to obtain a new customer on a specific channel (affiliation in this case) or in general.
To calculate it, we use the following formula: Customer acquisition cost = (Marketing cost + Sales cost) / Number of customers obtained
To this must be added the customer lifetime value which corresponds to the length of time your customers will use your products or services. So you see: a customer who has taken out a subscription with you will have a much greater lifetime value than a customer who only buys a product from time to time.
Why is it important to pay attention to the cost of affiliate customer acquisition?
The answer to this question is obvious: to calculate the ROI of your affiliate campaigns. It’s also necessary to
improve the ROI of your affiliate campaigns
. In fact, if you know the cost of acquiring a customer, you can calculate the investment needed to meet your objectives. And, above all, to estimate the resources to know the the most effective business levers.
In the case of affiliation, you should know that you only pay according to the results you achieve. This means that the initial investment is low (excluding any setup costs). That said, by choosing the
wrong remuneration method
customer acquisition costs can be much higher than expected.
This is the case, for example, if you opt for CPC remuneration for your affiliates when you’re looking to generate leads. Although the campaign will inevitably be less expensive than with CPL or CPA, conversion will also be lower. This will ultimately lead to a much higher cost of customer acquisition.
Finally, the customer acquisition cost can also be used to calculate your profit margin by product. This is an excellent measure for compare your different marketing campaigns. This makes it easier to test different products sold through different affiliation channels. But also to evaluate the performance of the same product across all the promotional channels used.
How to optimize customer acquisition costs?
The best way to optimize and improve the cost of customer acquisition is toincrease the value of your customer. This can be done in a number of ways.
First of all, by working on the perceived value of your product and, therefore, on its psychological price. It will be easier to sell a luxury product at a high price without surprising the customer. To improve the perceived value of your product, you can develop its image (by emphasizing the home-made aspect or rarity, for example).
Alternatively :
use reputable affiliates and choose them carefully
. After all, an affiliate who is recognized in his or her sector will find it easier to sell your referral to his or her audience. Without changing the nature or value of the product, this will enable you to reach a more qualified target more likely to buy your article (because they’re either at the end of the conversion tunnel or don’t really need to be convinced other than by recommendations from their favorite influencers or sites).
How can you lower your customer acquisition costs?
The greater the number of people interested in your product, the lower the cost of customer acquisition. Indeed vou get more for the same effort.
As we explained in the previous paragraph, it is possible to work on your offer and the way you distribute your referrals to optimize the cost of customer acquisition.
You’ve got it: to optimize your customer acquisition cost, you need to offer a product at the right cost (neither too high so as not to lose sales, nor too low so as not to severely dent your margin). In addition work on customer loyalty to avoid paying several times for the same customer. Finally, you need to make sure youuse the right channels and target the right people at the right time.
If you’re interested in affiliation, the
Casaneo
teams are at your disposal to help you create and optimize high-performance campaigns to improve your customer acquisition costs and, consequently, your ROI.
Affiliation Marketing at your fingertips
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