The value each customer contributes to your bottom line is directly related to the cost of customer acquisition, or COCA. Yet, many businesses launch advertising campaigns or even full-scale digital marketing efforts without tracking costs and putting them in perspective – a crucial mistake when it comes to optimizing marketing spend.
Understanding COCA is the key to separating effective efforts from wasteful ones!
Throughout the life of your business, you’ll always want to be generating revenue. Most of this comes from finding people who might be interested in your goods and services – prospects – and nurturing them down the path into paying customers.
Generally, finding and “converting” a new customer will take more time and money than getting repeat customers to make more purchases. Even so, new business is the lifeblood of successful brands across virtually all industries.
COCA is one of the most important metrics in all your efforts – the average amount you spend on sales and marketing to attract one customer. Not only must your sales exceed your COCA, but you should always be looking for ways to cut COCA.
These days, the average consumer is exposed to millions of marketing messages each week. While many of these come from traditional sources like broadcast media, print media, and storefront displays, digital marketing is growing its mindshare every day.
Digital inbound marketing can be far superior to traditional marketing thanks in part to a lower COCA. Done correctly, a well-written landing page or “drip marketing” email campaign can be practically free. Still, calculating COCA is vital. Why?
Enterprises of any size need to be nimble and ready to reallocate marketing efforts based on performance. A campaign that might seem effective in terms of sales numbers can actually be revealed as wasteful when COCA is measured.
Campaigns on different channels could both be performing adequately, but COCA can reveal that one of them is a net opportunity cost. A campaign that looks efficient could be keeping you from investing in the truly successful channel with the lowest COCA.
To find COCA, start by adding all your channel-specific sales and marketing expenses. That includes all ad costs, commissions and salaries, and overhead for a week, a month, or a quarter. Then divide that figure by the number of new customers generated by those efforts during that time. Do the same for each channel.
Many people don’t like math, and this is even true of entrepreneurs. That said, don’t panic: If your bookkeeping is sound, it’s easy to keep a handle on COCA over time. Knowing your COCA gives you more control over your company’s financial destiny.
Smart entrepreneurs track COCA and tackle it with innovative business models. Aligning your business with the way buying behaviors work on the Web is the secret to cutting costs.
In fact, inbound marketing costs 625% less than traditional outbound marketing. Plus, all the key metrics are easily available: Traffic, leads, and customers react instantly to any change, so businesses can evolve quickly and find what works for them.
It all comes back to “inbound marketing,” the concept of driving lead flow through adaptable, customer-focused methods on the Web. Inbound marketing can completely replace the excessive and volatile costs of search advertising.
If you’re excited about COCA and looking to drive deep savings, give inbound marketing a try.
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