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How to work out the customer acquisition cost before a new campaign
Like any brand – we are busy generating leads through all sorts of channels. While it’s easy to find out how much each leads cost directly related to a campaign, the golden amount of how much a customer will cost to acquire is a little trickier. In this blog, we’ll explain what customer acquisition cost (COC) is and how to calculate it.
What does customer acquisition cost (COC) mean?
The customer acquisition cost, or COC for short, is a performance metric we all need to be using.
When used within highly targeted campaigns, COC can tell us how much money we have to spend to leverage a new customer, and if the marketing activity we are about to do is worth it (you read that right, not how much you’ve spent, but how much you need to spend).
Knowing the customer acquisition cost also makes it easier to figure out our return on investment (ROI), which we can all agree is essential to our reporting!
Is COC the same as CPA (cost per acquisition)?
Nope! If you thought you’d already cracked it, we’re sorry to break it to you. COC is the cost of acquiring a paying customer, whereas CPA is the cost of acquiring a fresh, unconverted lead. Any analytics tool will give a CPA, but COC involves a quick calculation.
The cost of customer acquisition formula
So, unlike most performance-related metrics, we need to do a little maths to know what our COC is. We’ll use this step-by-step written by Mailchimp, one of the email marketing platforms we use here at Burst Creatives:
- Add up the costs associated with acquiring new customers – this includes marketing and sales costs;
- Once you have this figure, divide it by the number of customers you acquired throughout a specific period – a quarter or a year.
For example, if you spent £8k on marketing in 2021 and acquired 800 customers, the CAC would be 80p. This is because 8,000 ÷ 800 = 80p.
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