What is the impact of a high customer acquisition cost?

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That said, it's clear that a high acquisition cost can do damage to your business.

CAC should be less than the average customer spent with your business. For example, if the average is $100 and the CAC is $500, your business is losing money to attract customers, which is not healthy for any business.

cac-negative-lose-money

Having a CAC that is higher than the average profit per customer for too long can mean your company goes bankrupt.

So what should we do in this case? In principle, you can review your investments. There is a proportional relationship. That is, the less you spend, the lower the CAC will be. So, one of those perspectives is cost reduction, which can be generated by cutting unnecessary expenses.

As for the number of clients, there is an inverse relationship: the more clients you generate, the lower the CAC will be. So, the other perspective is to focus on generating more clients .

To do this, investments must be directed towards strategies that increase kenya whatsapp resource the efficiency of Marketing and Sales in acquiring new qualified prospects .

Will it be necessary to hire a more comprehensive tool? Training for your team? Try to find out what you need to improve your business.

Lifetime value (LTV) – life cycle value
The Lifetime Value or value of the client's life cycle refers to all the value given by the client during the relationship with the company. That is, the money that comes in. In the agency, this means the contract time and the possibilities beyond it. We could make a list:

Investment in project
Monthly feed
Commission on networks and media
Commission on production
So, with those two metrics you create a balance sheet. How much you spent to acquire a customer and how much they will spend to become a customer. Obviously, our goal is to have the lowest CAC possible and the highest LTV possible.

A positive balance would be like this:

lifetime-value-life-cycle-value-on-balance

Little is spent to acquire new customers and the maximum value is obtained from them. A negative balance would look like this:

lifetime-value-cac-on-balance

The cost of acquiring a new customer is not offset by the value they bring to your business. Money is lost.

ROI – Return on Investment
This metric will show the balance, positive or negative, that an investment had. Yes! Finding a new customer is an investment, and the ROI must be evaluated like any other investment. So:

ROI = Revenue generated – (investment + operating cost)

In the operating cost we include the acquisition cost.