Internet Marketing Acquisition Cost
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The entire purpose of search engine marketing is to attract new prospects and buying customers to your website. Can you acquire customers for less than the average $20-$30 cost of finding a new retail customer offline? Maybe, but it generally depends on what you are selling. The more expensive your product or service, the more you must spend to acquire a new customer.
The cost of lead acquisition equals your marketing cost divided by the number of customer leads that the activity generates:
Cost of Lead Acquisition = Marketing Cost / # of Leads
Acquisition Cost Example
Lets say that you spend $100 for pay-per-click ads on Google to get 20 people to your site, your cost is $100 divided by 20, or $5 per lead.
If only two of those 20 people buy (10% conversion rate), your cost of customer acquisition is actually $50 ($100 cost / 2 conversions). That’s fine if they each spend $250 on your site, but what if they spend only $25?
You can compute acquisition cost for any single marketing campaign or technique or across an entire year’s worth of marketing expenditures.
The average cost of acquiring a new customer approximately equals the profit derived from an average customer’s purchases in the first year. In other words, you might not make a profit on your customers unless they spend more than the average or you retain them for more than a year. However, it is very easy to reduce your dollar cost of customer acquisition and stand a better chance of making a profit. It takes three times as much money to acquire a new customer as it does to keep an existing one.
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