Cost of client acquisition (COCA) is also sometimes called CAC or client acquisition cost. Some companies substitute the word customer for the client. Your average client acquisition cost is the fully loaded cost of marketing and sales that your company invests 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, commissions, and bonuses, and you fully load that in, considering taxes and benefits. Then consider all of the out-of-pocket expenses you have for trade shows, sponsorships, pay-per-click advertising, and digital marketing.
Track Cost of Client Acquisition (COCA) 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 and look at your CRM system and your ecommerce 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 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 ideal client type and 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.
The 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 your ability to invest in the average client acquisition cost. 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. 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 it 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 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.
Also, see What Is Your Average Cost of Client Acquisition or COCA?
To learn more about the average cost of client acquisition (COCA), enroll now in our free 7-day eCourse: Go-to-Market Strategy 101 for B2B SaaS Startups and Scaleups.