What is Customer Acquisition Cost?
Customer acquisition cost is the cost spend to acquire a customer or get an order from a new customer.
How to calculate Customer Acquisition Cost?
In simple way, Customer Acquisition Cost (CAC) is calculated basically by dividing total marketing cost by number of customers/orders you get.
Formula will be CAC = Total Marketing Cost/Customers acquired
This formula will be same for both b2c and b2b but only difference is that in b2c, you will get small orders i.e., 1 pc or 2 pc and in b2b, you mostly get bulk orders i.e., 10 pc or 20 pc or 50 pc, so you have to calculate your maximum CAC accordingly.
Check CAC for B2C:
Suppose your product MRP is 250/-. Your cost is 50/-. Product fall under 12% tax category so it will be 250/1.12 = 223.21/- approx. after deducting tax. We assume freight per pc is 40/- and you fixed your profit is 30/- per piece.
Now you have 223-50-40-30 = 103/- rupees left per piece for total marketing cost to spend at advertisement, sales & marketing team and others for acquiring customers. If you have any other expenses like any b2c portal commission or any charge then you have to deduct that also from this.
Suppose you run an online campaign for 15 days and spend 20000/- as total marketing cost. You get 200 customers from it. So, as of formula
CAC = Total Marketing Cost/Customers acquired = 20000/200 = 100/-.
So, your CAC is 100/-. Means your customer acquisition cost is in control. But if your CAC increases then you have to increase either MRP or reduce profit.
Other factors effecting CAC includes advertising cost, marketing and sales team expenses, production cost, distribution cost, inventory upkeep cost etc.
Check CAC for B2B:
B2B selling is slightly different from B2C as selling structure is different. Selling rates is down but order value is higher.
Suppose your product MRP is 250/-. Your cost is 50/-. But you can’t sell product at MRP to business as they also need margin and profit to earn by further selling. Your selling rate is 80/- to a business.
We assume freight per pc is 5/- because in bulk quantity freight will be less and you fixed your profit is 15/- per piece. Now your total product cost is 50 + 5 +15 = 70/-. You have 10/- per pc to spend at CAC. This 10/- may seem very less as compare to above discussed B2C’s 103/- but B2B orders is not like B2C as of 1 pc or 2 pc. It’s like 10 pc or 20 pc or 50 pc or above/less but not fixed.
Suppose you received order of 50 pc so your customer acquisition cost should be in range of 50*10= 500/-.
You run an online campaign for 15 days and spend 15000/- as total marketing cost. You get 20 new customers from it. On average product quantity is 40 pc for all orders.
CAC = Total Marketing Cost/Customers acquired = 15000/20 = 750/-. But average product quantity was 40 pc, so your CAC should have been less tahn 400/- but it is 750/- which is higher.
But in B2B, more likely possibilities of repetition of customers. So, may be first time you get some loss but it could be fulfilled from incoming orders. So, CAC is also related to customer lifetime value (CLV or LTV). Customer lifetime value may also be applicable in B2C sale.
B2B’s CAC is also affected by advertising cost, marketing and sales team expenses, production cost, distribution cost, inventory upkeep cost etc.
Hope above information is helpful to you…
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