Internet Marketing Acquisition Cost
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.