Average Customer Acquisition Cost by Industry: Tracking CAC Benchmarks

In this business domain, your brand should always stay lively. It is very important to know the standards of the market and if possible set a new benchmark that should be above the average of the industry. Customer acquisition cost helps you to understand how effective the sales and marketing efforts are. Considering the average of the industry will help you understand your position among the competitors. With CAC, a brand can adjust its marketing, and sales approach, optimize resource allocation, and strengthen overall profitability. Now let us look into the calculation of CAC. 

Partnering with a mobile measurement partner (MMP) can enhance CAC analysis by providing accurate tracking, deeper audience insights, and attribution data. With this knowledge, brands can optimize resource allocation, refine marketing strategies, and improve overall profitability.

Calculation of CAC 

The Customer Acquisition Cost is the total cost of acquiring a new customer. It includes marketing expenses, sales expenses, and other costs related to acquiring new customers. For this calculation, we divide the sum of total marketing and sales expense by number of new customers acquired. For example, if a company has spent Rs 100000 for marketing and sales and got 1000 new customers, then the customer acquisition cost is Rs 100. We should always try to make the CAC less than the average revenue per user (ARPU). That is the healthy CAC for most businesses. Customer lifetime value is an important metric considered by every brand. It is the net profit attributed to the entire future relationship with the customer. It is always sound to have a ratio of lifetime value to customer acquisition cost of 3:1 or higher. It is difficult to say what CAC is good or bad as that solely depends on the nature of your business. Several factors are present in this calculation, some of them are : 

1. Combining market and sales costs. Considering one of these can lead to a faulty CAC.
2. Determination of the new customers should be from the same time frame as marketing and sales.
3. Calculation of the formula should be carefully done.

Factors Affecting CAC

There are mainly four factors that affect the CAC. They are : 

Industry - Customer acquisition differs according to the industry in which the brand is working. Highly competitive industries can have a higher CAC trend in the market. The difference in the sale cycle of each industry can also affect the time and cost needed to acquire a new customer. 

Marketing and Sales Channel - The channel through which a brand markets and sells its products differs. The cost of each channel is also different. Usually modern and innovative channels are more cost-effective than traditional channels. Certain strategies can be more expensive than the other. 

Competitors - The competitors of your brand can affect the CAC. If they are good, the better you should try to stand out from the crowd and pull customers towards your company. Market saturation, price wars in the market, reputation, and goodwill are some of the factors that work well in this situation. Offering unique products and brand loyalty is also important.

Target Audience - The target audience can seriously affect your CAC. targeting a more niche audience and a general and more accessible audience can influence customer acquisition costs. Information like age, gender, income, geographical locations, behavioral patterns, psychographics, market awareness, and education can affect the calculation of CAC. 

 Here we have discussed some of the factors that affect CAC. Now let us move into the benefits of CAC.

Benefits of CAC

There are many benefits to CAC calculation. Some of them are : 

Improve efficiency - You can improve the efficiency of your business with proper analysis of CAC. If you see unusual or fluctuating CAC you can thoroughly check the marketing or sales funnel and the customer onboarding process. Businesses can use the data about CAC for improvement of the specific weak areas of the brand. CAC solely may not be able to find the weak spots, but lifetime value, churn rate, return on investment, etc should be also calculated along with the CAC.

Decision Making - CAC helps in making better decisions. With proper CAC we will have better insights and make better decisions in budget allocation, marketing strategy, financial planning, customer segmentation, etc. 

Budget Optimization - By knowing the cost of acquiring a new customer businesses can allocate their marketing budget more effectively, making sure that more funds are spent on more profitable channels. This focus on the better-performing channels will help the brand to increase its return on investments. This can also help in estimating funds for the growth of the company.

In conclusion, CAC is a crucial metric that needs to be carefully calculated and analyzed. Tracking and calculation are an inevitable part of business. For this, Apptrove will be the right choice for your brand. Apptrove can help in tracking with its unique features and dashboards and be of great assistance in your business journey. Apptrove can ensure your brand has a strong foundation and a good position in the market.