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Customer acquisition cost (CAC) is the cost related to acquiring a new customer. CAC refers to the resources and costs incurred to acquire an additional customer. It is the best approximation of the total cost of acquiring a new customer.
It generally includes things like: advertising costs, the salary of your marketers, the costs of your salespeople, overhead, commissions, bonuses etc., divided by the number of customers acquired.
Why is it important - It's a really useful number to help you calibrate your investment and make sure that you are making the right decisions for your growth and why does it matter – If your customer acquisition cost is greater than your revenue for a long enough period of time, you'll can possibly go out of business.
We are going to discuss the Customer Acquisition costs and the importance of calculating these costs, then what is the Life Time Value of the customer and finally will discuss strategies on Retention of customers.
What You Need to Do
Learn how to Retain your Customers
According to research from Harvard Business School, increasing customer retention rates by only 5% increases a company's profits by 25-95%.
It is the emotional journey of the customer that should never be ignored - It is not just what you sell but how you make them feel.
Benefits of Keeping your Customers
More efficient, more effective more profitable
Selling to existing satisfied customer is 60-70%
Lifetime value of a loyal customer can be 10 times greater than the first purchase.
They become Raving Fans
They can be your best Testimonials and Referrals
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Next: Episode A2.007 5 Steps to Grow your Business & generate more money
Written by Raj Kapur
new choice for BUSINESS SEARCH