Cost of client acquisition (COCA) is also sometimes called CAC or client acquisition cost. Some companies substitute the word customer for client. Your average cost of client acquisition is the fully loaded cost of marketing and sales that your company is investing to acquire a single client.
Let's say your company has three full-time equivalents in marketing and ten or fifteen full-time equivalents in sales. Add up all the base salaries, the commissions, the bonuses, you fully load that in, taking into account taxes and benefits. Then take into account all of the out-of-pocket expenses you have for trade shows, sponsorships, pay-per-click advertising, and digital marketing.
Track Costs Over Time
Add all of that up to come up with a total number for a particular time period. In that time period, you go back look in your CRM system and your e-commerce platform to figure out how many new customers your company has generated or acquired in that same time period. Take that big number, what you spend and fully loaded marketing and sales costs in that time period, and divide by the number of customers that were brought on board that during that time period. You’ll arrive at an average cost of client acquisition.
It's extremely important to track this over time by the type of ideal client, by the buyer persona, because some buyer personas are more profitable than others. Some generate more revenue than others. Some are more expensive to bring on than others. Average cost of client acquisition just like its sibling, average client lifetime value, will be largely dependent on decisions that you make at your business model level -- the price point of your products and services, the kinds of clients you sell to, the target market, and the profitability.
All of those impact what you can afford to invest in average cost of client acquisition. But what we find across the board is that companies that are new to digital marketing, content marketing, and inbound marketing that really aren't thinking about their full sales funnel, many times they're not tracking this number at all, or they've never made investments that actually scale this. I can tell you without a doubt, if you ever watch the reality TV show Shark Tank, and you're used to hearing the kind of questions that participants on that TV show get from Mr. Wonderful, Kevin O'Leary, Mark Cuban, or any of the others, they always ask what does it cost for you to gain a new customer? What does cost for you to acquire a new customer?
The Bottom Line
So regardless of whether you're thinking about trying to get on a reality TV show like Shark Tank, raise outside capital, or you just want to make sure that you have a healthy business model, make sure that you're tracking, managing, optimizing, and spending a lot of time not just looking at your average client lifetime value, but also looking at your average cost of client acquisition, your COCA.
Do you track your company’s average cost of client acquisition or COCA? Share your thoughts in the section for comments below.
To learn more about average cost of client acquisition (COCA), download our eBook "3 Revenue Growth Opportunities Your Business May Be Missing."