Customer Acquisition Costs

Customer acquisition cost is a phrase used to describe how much a marketer is willing to spend to acquire new customers. These costs are often critical in determining whether a marketing program has delivered a positive or negative ROI.

For example, if the customer acquisition costs for a manufacturer that sells a consumer’s products is $3, that is the cost it takes to get a customer to sign up and provide an email address. That cost has to be compared to the value acquiring a new customer. Perhaps that value is greater than 3 bucks maybe it's $10. If that's the case the lifetime value of that customer ($10) divided by the customer acquisition costs ($3) gives a ratio that is ideally greater than 1 and even better than that, is a ratio greater than 3. Meaning if a marketer believes a customer is worth $10 they should be willing to spend $3 all day long in order to generate as many new customers as possible.

Marketers understand that there are different channels they can use to acquire new customers. These include blogging, social ads, Google Search Marketing, or other lead generation tools. Each of these channels will have different costs and then will ultimately generate a different cost per new customer acquired. For this reason it is important to calculate the customer acquisition ratio’s for each channel

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