How the race for Eyeball Views, Clicks, Likes, and Shares defines Online Marketing
What is online marketing and how it Works? Ever wondered how websites give away much for free or for low prices and offer lots of information and other such conveniences? Did you ever felt the need to know how online marketing works with terms such as clicks, click through, eyeball views, and likes and shares […]
Brand Name – Definition, Features and Considerations behind naming a Brand
Brand name is one of the brand elements which helps the customers to identify and differentiate one product from another. It should be chosen very carefully as it captures the key theme of a product in an efficient and economical manner. It can easily be noticed and its meaning can be stored and triggered in […]
The Significance and Impact of Corporate Behavior
The corporate behavior tends to have a direct or sometimes an indirect impact on the economic state of the countries and communities they operate in. The very recent examples was the economic crisis in US, Brazil and Asia in 1998 and hard to forget ever continuing financial meltdown of the current times. Any lack or […]
Introduction to Media – A Brief History
We often hear the term fourth estate being applied to the media. The term refers to the four pillars of democracy and the media is the fourth pillar and an important one at that. Ever since many countries adopted democratic norms of governance, a vibrant and a free media were thought to be the necessary […]
Understanding Retail – What is Retail ?
Before understanding the concept of retail, let us first go through few terminologies. Market – Any system or place where parties are engaged in exchange of either goods or services is called as market. The parties are often called as buyers and sellers. The seller offers his goods or services to the buyer who in […]
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:
For example, the car manufacturers know that their business does not come to an end only by selling a car to customer; extra accessories, enhanced warranties, lifetime financial relationship are also source of revenue for them.
If the customer is totally satisfied then chances of buying another car or replacing it with enhanced segment car is also commonly noticed. Paying off for high quality service and deems relationship with manufacturer, the customers act as brand ambassadors and refer other customers to buy.
The process of retaining customers like this will help the organization to gain more profit. Due to enhanced profit the capital could be shared with acquisition cost of customers by utilizing it more on advertising and campaigning events to attract more new customers.
If the selling cost of a product is $100, the manufacturing cost is $98 and customer acquisition cost is $100, then the organization is having an overall profit of just $2, which is substantially very less. If the organization manages to increase the profit margin, then they have chances to increase the acquisition cost and also profit.
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.
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