Digital Marketing: Customer Acquisition Cost vs. Lifetime Value

Digital marketing has helped many customers increase their value year after year. It is crucial to track and calculate the lifetime value and CAC of leads when it comes time to spend on marketing and acquiring customers.

Executives who are successful in their companies evaluate the return on investment of their investments. When reviewing marketing strategies, however, managers and other individuals responsible for leading marketing fail to understand (or quantify) the marketing results. Many businesses misunderstand the value of their clients or undervalue their leads.

What is the Customer Acquisition Cost?

This statistic gives insight into the cost of acquiring a new client by adding up sales and marketing expenses for a given time.

CAC calculations can include various fixed and variable expenses depending on how much insight you desire into your acquisition costs. CAC calculations can also be done per account by segmenting expenses more precisely.

While customer acquisition cost is an important metric, companies that succeed keep the lifetime value of a lead in their minds.

What is the Lifetime Value of a Lead?

This is an estimate only. What happens if customers make multiple purchases throughout their lives? What happens if consumers abandon brick-and-mortar grocery stores in favor of this one instead?

This is why the Customer Lifetime Value (CLV), was created. A CLV calculator can be found by simply searching on any search engine. This measure can help you to understand the costs of client acquisition for your business.

If the client makes $25.00 per week for twenty years, a $10.00 client acquisition cost may seem very affordable. Ecommerce businesses are failing to retain customers, as most customers make only one purchase.

Top Customer Acquisition Channels for Digital Marketing

It’s useful to compare your company with other companies in terms of the internet traffic mix. Analytics tools such as Google Analytics can be used to track where customers are coming from. You can also compare your company with others in the same industry and size. This will help you to make a case for increasing investment in paid or organic search.

These are some of the most popular digital marketing channels that help in customer acquisition:

Organic: SEO generates organic traffic through natural, authentic, and value-based marketing. Instead of relying solely on paid advertising or sponsored articles, an organic digital strategy incorporates methods that generate revenue over time.

Social is a subset or channel of digital marketing. It is simply the promotion of goods or services via social media platforms such as Twitter, Facebook and Instagram.

Email Marketing: Email marketing combines digital and direct marketing. You can use email to promote your products or services. You can use it to inform your customers about new products and special offers.

paid search: Paid search is a type of digital marketing that allows search engines such as Google and Bing to allow marketers to place advertisements on search engine result pages (SERPs). Paid search works on a cost per click basis, meaning that you only pay when someone clicks your ad.

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