Customer Acquisition Cost
Customer acquisition cost is the cost which suppliers invest to acquire a new customer. This cost should be always less than the overall value of customer in the entire customer life-cycle. For example, if the cost incurred to acquire a customer is $10, but the contribution of the customer to the profit is only $9 till the life of relationship with that customer, then there is an obvious business loss. Customer acquisition cost depends on way the customers are acquired. Lower the acquisition cost higher is the chance to increase return on investment (ROI). For accomplishing this, the following tasks should be followed:
The best approach to predict the customer acquisition cost is to calculate the overall investment on a product. For example, an organization sells a product for $100 which includes the manufacturing cost of the product (say $85) and the profit earned ($15 accordingly). Now, the organization also spends $50 for that product in campaigns and advertisements. Hence to capitalize this $50, at least one customer must be acquired at $50. This will be the maximum customer acquisition cost for the organization. However, the profits may further increase if the organization can acquire customers for less than $50, or when they sell the product at some higher prize. Although the above example is the simplest way to calculate the customer acquisition cost, there are following other important factors that affect customer cost:
The above two examples could have a substantial impact on acquisition cost of customers. Managing the acquisition cost of customers is the primary aspect to enhance the business and maintain relations with customers. Hence it is one of the most important factors that an organization should focus on.
- Customer Acquisition - Introduction
- Customer Life Cycle
- Measuring Acquisition Equity
- Customer Loyalty & Satisfaction
Authorship/Referencing - About the Author(s)
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