Getting this right unlocks all kinds of possibilities
It’s possible there are marketers who try to do their jobs without knowing what their cost to acquire a customer should be, but we can’t imagine why.
If you subtract your COGS (cost of goods sold), non-marketing SG&A expenses and desired profit from your average sale price, you know the ceiling for your marketing budget.
With this knowledge in hand, you can not only figure out how much to spend, but also what customers are worth targeting and what channels can help you reach them profitably.
Steven Bellach, Principal at Bottom Line Marketing, makes CAC (customer acquisition cost) a cornerstone of his strategic consulting work. He joined our This Week in Marketing show to explain the importance of this data point and how to calculate it. He brought with him some great real-world client examples illustrating the possibilities that having a correct target CAC opens.
Even better, we dialed in a current client, Purusha Rivera, Founder of My Baby’s Heartbeat Bear, who helped shed even more light on the topic.
Purusha and Steven worked together to understand the relative profitability of her wholesale and direct customers. They realized their marking spend was misdirected and refocused on the most lucrative segment. They also overhauled their channel mix, messaging and other aspects of their marketing strategy.
Check out this enlightening show, and special thanks to Purusha for joining us all the way from Delaware.