CAC (Cost of Customer Acquisition) is an indicator on which the success of your business depends. How to calculate and how to improve

At the start, many entrepreneurs are ready to do anything to attract new customers. But not everyone understands what needs to be done marketing moves, so as not to throw money away and get the maximum benefit from advertising. Every business owner should know the cost of attracting a client or CAC. If you learn to calculate it correctly, you can achieve the maximum and also predict the marketing budget for the future. Understanding the meaning of this indicator will help you find the best channels to attract new customers at the lowest possible cost.

All successful brands carefully calculate the CAS, analyze and use this information for optimization.

What is Customer Acquisition Cost (CAC)?

CAC is an indicator that determines how much one costs new client. Sometimes the term User Acquisition Cost is used - the cost of a new user.

What does SAS depend on:

1. From advertising and sales costs. This includes the salaries of all marketing and sales employees, non-production costs for their maintenance, costs for marketing tools;
2. From attracted new clients.

When running any business, you need to know how much profit you can get from investing in advertising. By investing in advertising in order to promote a business (website development, advertising on radio, TV, social media, banners), everyone wants to know what and when they will receive in return.

If you calculate the return from a new paying client in perspective (in relation to the client’s life cycle), you can see whether the money invested is worth the return and which advertising moves are most effective in obtaining new clients.

Many people confuse CAC with the term CPA (cost per action). CPA is a fee on the Internet for a certain action (for example, a fee for registration, downloading, purchasing). The company pays everyone, both new and existing customers. These are essentially completely different terms that have nothing in common with each other, since CAC refers to all costs associated with sales and marketing.

In more understandable language, CAC is the amount of money spent on advertising to attract new customers. This is the main factor that shows how successful a company is in its business model.

A thorough and correct calculation of CAC shows which customer acquisition channels work most effectively and in which marketing moves it is best to invest your funds.

Understanding CAC is very important for any company, as it is a reflection of the success of the business in the future. At first, you need to invest a lot of money and finances to attract customers, but with each subsequent month, costs will decrease and profits will increase if you correctly analyze the formula for calculating CAC.

There are four reasons why a CAC score is needed:

1. Calculating CAC is necessary to understand how long it will take to make a profit after an advertising campaign and how much money will be spent on attracting a client.
2. The CAC indicator helps to calculate and increase the LTV/CAC ratio.
3. It is necessary to review the effectiveness every month marketing campaigns and analyze their performance.
4. The goal of any business is not only to generate income, but also to increase margins. CAC will show the ratio of gross profit to the cost of attracting new customers.

How to calculate the cost of attracting a client?

There is a simple formula for calculating CAC. It is necessary to divide the amount of absolutely all funds spent on attracting clients over a certain period of time by the number of clients attracted during this time.

But you need to understand that this formula has exceptions, and the final CAC figure will not entirely correspond to reality. In what cases and why does a simple formula not work effectively?

1. If the company has invested in advertising in a new region.
2. According to statistics, it takes 60 days for a potential buyer to become your new client.
3. Many customers are considered return customers rather than new customers.
4. Additionally, there are costs associated with user support. Many people use a free demo version of a product for a very long time before making their first purchase.

You can use a simple formula when everything used complements and enhances each other’s effectiveness.

Before you start calculating the CAC, you need to answer the following important questions:

1. How long does it take between an advertising campaign and the appearance of new customers?
2. What expenses must be included in the CAC calculation formula?

To understand how long it takes to return the invested funds, you need to calculate the client's payback period. You need to divide the income from one client per month by the cost of attracting him.

To understand which CAC figure will be optimal for your business, you need to focus on the ratio of two metrics: LTV and CAC.

LTV is the profit from an attracted customer for the entire time he stays with you (Customer Lifetime Value), and CAC is the cost of attracting him.

There is a scale that allows you to determine the optimal ratio of LTV and CAC:

The cost of attracting a client and its importance for business

To get closer to the 3:1 ratio, you need to look for new channels to attract customers.

The full formula for calculating CAC looks like this:

MCC - the total amount of money spent on advertising;

W - salary of marketing specialists;

S - costs for software and online services;

PS - costs for professional services;

O - overhead costs;

CA - the number of clients attracted using the amount of funds spent.

To get a reliable result, you need to calculate CAC for each advertising direction used separately. Then you will understand which marketing move is most effective and in which direction you need to increase investment.

You can attract much more clients if more money invest in channels with low acquisition costs. At the same time, the total amount of marketing funds will not increase.

We calculate SAS using examples

Your customers don't care about your costs, they want to know how your service can solve their problems. Therefore, a company’s pricing strategy should not be based on marketing costs, but it is necessary to calculate CAC. Let's look at examples of calculating customer value at various companies.

SaaS company

For example, a SaaS company does internal sales. Some people buy immediately, while others will turn from a potential buyer (lead) into a real buyer only after 60 days.

For example, a company tried several new channels in June and spent $5,000 on marketing. This month 50 new clients were attracted. So CAC is equal to 100 dollars. But you need to take into account that thanks to the advertising campaign in June, after 60 days the likelihood of more buyers will increase significantly.

Therefore, it is worth analyzing the effectiveness of the June advertising campaign two months later. In August, for example, the number of buyers increased to 100 people. Thus, the CAC will be $50. Therefore, when making calculations, do not forget about the time interval between marketing costs and.

Then the equation for calculating CAC will be like this:

CAC = (Marketing Expense (n-60) + 1/2 Trading Cost (n-30) + 1⁄2 Trading Cost (n)) / New Customers (n)

n = Current month

eCommerce company

For example, a natural sweets company invested $200,000 in advertising and attracted 20,000 new customers. This means the CAC is $10.

The average customer check is $25, and the markup on goods is 100%. Then the net profit is $12.5, of which $2.5 is spent on salaries, offices, etc.

You need to understand that some customers will completely switch to this brand, many will become regular customers, that is, it is necessary to take into account the metric life cycle customer (CLV, customer lifetime value). We'll talk about how to calculate CLV below.

If the majority of customers buy sweets once a week for $25 for 20 years, then the CAC of $10 with an average check of $25 is a pretty good result for such a company.

Online casino

They make a profit if the players lose. Accordingly, the more there are, the higher the profit.

For example, a company spent $1,000,000 on a marketing campaign for a poker room.

Each player will play about 60 combinations per hour. If 20 players play in a casino at a time, then the casino will receive a profit of at least $1000. If the number of participants is 100 people, then the profit from one will be about 50 dollars, and from 100 people - 5000. This is only in the first months, then the percentage of profit will increase due to the return of players and the addition of new clients.

Calculation of LTV (customer life cycle metrics)

LTV = (average sales value) x (average number of sales per month) x (average customer retention time in months)

For example, a person pays a yoga membership of $20 per month for 2 years, then $20 x 12 months x 2 years = $480, but not all clients will attend yoga for 2 years. Therefore, there is a more accurate formula for calculating customer lifetime value.

LTV = (average number of orders per month) x ( average bill) x (average duration of client interaction with the company) x (profit share in revenue).

Common mistakes when calculating CAC

1. Many people forget to add the salaries of marketers and salespeople or those specialists who assist in conducting marketing campaigns when calculating CAC.
2. The cost of equipment rental for these employees must be included in the calculation.
3. When calculating CAC, you must not forget to include the costs of marketing tools.
4. On the site it is necessary to conduct analytics of how many orders came from a particular blog. End-to-end analytics is also necessary - the connection between the visitor’s source and his first purchase.
5. The calculation does not need to take into account the number of old clients.

How to reduce CAC?

There are several methods to optimize SAS:

Often marketers do not correctly consider and interpret the meaning of the Customer acquisition cost indicator, or do not take it into account at all when analyzing the effectiveness of campaigns. Although it is extremely important, especially in the field of E-commerce. In order for you to better understand what CAC is and how to calculate it, we have selected, translated and adapted for you an excellent article that examines this topic in detail. Couldn't have said it better.

CAC (Customer acquisition cost) is the amount you pay to attract a new customer.

To put it simply in simple language, then you can calculate it like this: You need to divide all the costs associated with attracting a client over a certain period of time by the number of new clients received during this period. Do not confuse this indicator with cost per action (CPA), as there is a fundamental difference between them. In e-commerce, cost per action is usually the amount you pay to convert a customer (for example, to make a sale), and this applies to any (new or old) customer. CAC is an indicator that relates specifically to a new client. An example is Google's description of CPA as "the price you are willing to pay for a conversion" rather than for acquiring a new customer.

The importance of CAC in E-commerce

We figured out what CAC is. But why is this indicator so important? And how can CAC help you make more money? We answer! So, the cost of attracting a new customer is one of the MOST important indicators for any online store, along with LTV (LifetimeValue - the total profit per customer over his life cycle). Why? Because your store must make a profit. This means that you must receive ROI (Return on Investment) from marketing and sales. So the ratio of the profit received from a client to the cost of attracting this client can be called one of the most important indicators:

LTV:CAC

It's simple - your business will collapse if the CAC is higher than the LTV. Let's look at some examples to help you figure out exactly what LTV:CAC ratio you should be aiming for.

• Less than 1:1 – You are racing full speed towards bankruptcy
• 1:1 – You lose money on every attracted client
• 3:1 – Ideal ratio. You have a thriving business and a strong business model
• 4:1 – It seems good, but it seems that you are not investing enough money, and you could develop faster. Launch more aggressive customer acquisition campaigns and achieve rates close to 3:1

To all of the above, it is worth adding that the CAC indicator is also necessary to evaluate the effectiveness of your marketing campaigns. The goal is to find marketing channels that have a good LTV:CAC ratio. There is no point in spending all your time on campaigns that bring in a small number of customers. Find the right balance between time and effort, LTV:CAC ratio and number of customers acquired. To summarize, there are two main reasons why CAC is a very important indicator:

1. Calculating your LTV:CAC ratio and time to acquire new customers will help you assess the overall health of your business. To figure out how solid your business model is, it helps to understand how long it will take to recoup the money you spent on acquiring new customers. The return on investment after 3 years can hardly be called success, because you want to regularly invest this money again and again. You should aim for a refund within one year or less.
2. CAC helps in optimizing your marketing campaigns and the channels you use. Where do your most valuable customers come from? Which marketing channels have the best LTV:CAC ratio? Remember that the cost of acquiring a customer varies from campaign to campaign, it is constantly changing and you need to monitor this metric regularly - if you stop getting ROI, then stop investing in this campaign.

How to calculate CAC for your online store?

There are two ways to calculate the cost of customer acquisition: a simple (but less accurate) one, and a more complex one that requires collecting more data. In general, there is only one way that can be called truly correct - and this is the one that is more complex. However, it is better to do a simple calculation than not to do it at all. This way, you can at least understand which marketing channels you are using are working and which are useless.

Be careful when using data obtained this way in LTV:CAC ratio calculations, as many key costs are not taken into account.

A simple way to calculate CAC:

Where: CAC (Cost of customer acquisition) = Cost of attracting a new customer. MCC (marketingcampaign costs) = The total cost of marketing expenses aimed at attracting customers (but not retaining them). CA (customers acquired) = Total number of customers acquired. When we talk about marketing costs, we mean direct costs, such as the cost of displaying banner ads for an advertising campaign or the cost of clicks in AdWords.

A sophisticated (and most accurate) method for calculating CAC

Where: CAC = Cost of acquiring a new customer. MCC (marketingcampaign costs) = The total cost of marketing expenses aimed at attracting customers (but not retaining them). W (wages) = Salary for marketers and sales managers. S (software) = Cost of used in advertising and sales software(for example, the sales platform used, marketing automation, A/B testing, analytics services, etc.). PS (professionalservices) = Cost of professional services provided to marketing and sales departments (design, consulting, etc.). O (other) = Other overhead costs related to the marketing and sales departments. CA (customersacquired) = Total number of attracted customers.

We mention here the sales department, which is usually rarely associated with e-commerce. But some companies have special people dedicated to studying the possibility wholesale sales and execution of such transactions. As you can see, this equation includes as unknowns all possible costs that are somehow related to the process of attracting customers over a certain period.

If you want to know the exact cost of acquiring a new customer in a single advertising campaign or marketing channel, then you will have to start calculating all the costs associated with acquisition. For example, spent work time your employees for a particular advertising campaign in order to calculate that part wages, which was spent on its development.

What other problems could there be with the calculation?

Often, before a user makes a purchase, he goes through several advertising campaigns. For example, he first comes to the site through an advertising campaign on Facebook, but does not buy anything. Then he returns to the site thanks to retargeting and makes a purchase. What costs and in what proportion can then be correlated? In such calculations, break down each campaign by the cost of attracting and converting an existing client and by the cost of attracting and converting a new client. This will give you the total cost of acquisition for each campaign. And to calculate the total cost for each channel, add up the resulting costs in the campaigns involved in it.

This is a very useful calculation that allows you to figure out which campaigns and channels are most successful in terms of attracting and converting customers. At first glance, this may all sound a little confusing. But if you spend significant amounts on certain marketing channels, then taking the time to do this will definitely pay off. You will be able to see that some channels are not at all as profitable as you thought, or vice versa - you may have underestimated some method.

Improved CAC score

Eat simple ways Raise and optimize your CAC: improve conversion rates on your own website, improve your advertising campaign texts and targeting (always focus on those customer groups with the highest LTV:CAC ratio), analyze new, potentially more profitable ones , marketing channels.

We wish you success with your cost of acquisition calculations! We hope this article was helpful and welcome your comments. We will soon release a white paper entirely dedicated to key indicators efficiency in E-commerce. It collects and structures all the information about the indicators necessary for successful management e-commerce business.

Subscribe to the CubeLine Agency blog and don't miss out!

Translation and adaptation of the material: "How to Calculate Cost of Customer Acquisition (CAC) in Ecommerce"

In marketing there is such an indicator - Customer Acquisition Cost, the cost of attracting a client. Why is it needed, how to count it and what happens if you don’t do it - we’ll look into this article.

Imagine that we need to sell pink elephants.

We call all our friends and classmates, rent a hall for presentations, everyone gathers, we talk about the benefits of elephants and as a result we sell 20 elephants. The sale of each elephant brings us $100. Renting the hall cost $200.

Would it be correct to say that our profit was 2000-200=1800 dollars, and attracting one client cost 10 dollars?

And the second, much more important question, can we build our calculations for further sales based on this first experience?

Of course, the answer to both questions is “No.”

I'm sure you could easily answer the same and can explain why.

If not, let's think about it together.

Understanding the terms

Calculating CAC is easy: everything marketing expenses and all sales costs for a certain period of time must be divided by the number of attracted customers. The only problem is to calculate exactly all costs.

Let’s not complicate things and define LTV as the amount of money we plan to receive from one client over the entire period of his activity.

When talking about CAC, the LTV indicator is important - without knowing how much money a client will bring us, we cannot determine how much we are willing to spend on attracting him in order to make a profit.

CAC and LTV indicators are needed to calculate an acceptable indicator of customer “quality” for us. It is calculated by the LTV/CAC ratio and it is generally accepted that if this indicator is more than three, everything is great. Simply put, if a dollar invested in attracting a client brings three dollars, that’s great. Who would argue.

Politically correct clarification: the concept of “quality” of a client does not refer to the personal, business or any other qualities of a specific client or client segment. It's not even about money as such. It's about the cost-to-revenue ratio. The client who cost us a dollar and brought us five is of better quality than the one who brought us a million and cost 990 thousand.

Subtotal: understand the terms and concepts

CAC is the cost of attracting a client. How much did we spend for the client to buy from us?

LTV - how much money this client will bring us.

LTV/CAC is a ratio showing the quality of the client. If the ratio is greater than 3, this is a quality client.

Let's return to the story about elephants

If we only spent money on renting the hall and sold 20 elephants, we can say that the CAC was $10.

We can say. And, at first glance, it will look like the truth. But only for the first one.

For example, we forgot to take into account that we involved our employee to create the presentation. Who spent a full day working on its creation. We paid for this day (the employee receives a salary, right?)

We also did not take into account that it took us two days to call all our friends and classmates; during these days we did nothing else but call. In addition, some call recipients were in roaming and mobile operator withdrew additional money from our balance.

We took one elephant to the presentation as an exhibition specimen - we spent money on a truck and a caretaker.

Conclusion one: when calculating CAC, you need to take into account all costs.

But this is not the main problem - after all, it is not so difficult to identify all the costs and calculate them more or less correctly.

The problems start when we start to scale - we need to sell a lot of elephants every month, don't we?

And then it turns out that all our previous calculations of SAS have no special meaning and cannot be used to build a business model for further development.

Because we sold these twenty elephants to friends, girlfriends and other classmates. And half of these elephants were bought simply because we sold them, it was inconvenient to offend us, and receipts for payment for unnecessary elephants will go to the nearest trash can immediately after leaving the presentation.

That is, in order to calculate the size of the SAS at least somewhat correctly based on this whole story, we need to add some more components to these calculations.

Which are almost impossible to express in numbers.

Since we are essentially talking about sales to a loyal audience, but this loyalty is of a special kind and its value cannot be calculated. And we don’t need to count anything here. Because friends and classmates are not the target audience of our product at all.

We sat next to one of the buyers on the potty in kindergarten, we knocked out his tooth in the fifth grade, in the ninth he stole our girl, at the prom we waved off a crowd of gopniks, he couldn’t come to our wedding and apologizes for it It's been a year now - in what numbers can you calculate the Customer, motherfucking Acquisition Cost?!

Conclusion two: when calculating CAS, not all costs can be identified and calculated correctly.

If anyone thinks that we have now delved into abstractions that have little to do with reality, you are wrong. If you look around, you will probably find examples of how businesses did not take off or took off crookedly or flew “low” and not for long precisely because of a poorly calculated or not calculated CAC at all.

LTV greater than CAC is good. And when it’s the other way around, it’s bad. Picture from blog.profitwell.com

Three main mistakes that a correct CAC calculation can save you from

1. We have already described the first one in the story about elephants - many people mistake non-scalable factors for scalable ones. If four people visited your new website and made two purchases, do not rush to base your future business plans on a 50% conversion. It is possible that it was the wife, father, mother and brother who came in, and the wife and mother bought it. Mom out of love, wife out of politeness, dad wanted to too, but got distracted, my brother is in the fifth grade and couldn’t buy anything even if he wanted to.

2. You will spend too little.

Let's return to the elephants. We realized that we had made a mistake in our SAS calculations, got nervous and began to hastily “cut the bones”. They abandoned all plans for advertising and promotion, fired the sellers, wrote an ad “elephants for sale!” and hung him on a pole.

This gives three sales per month with almost zero CAC. Profit $300. There is no point in keeping such a business afloat, we are closing.

3. You will spend too much.

After the presentation and the first sales, we realized that we wanted to sell elephants more and more. We rented the hall again, covered the city with advertising posters, connected television and the Internet. There were five times more people in the hall than the first time. And we sold them 20 more elephants.

Everything would be fine, but this time, in addition to the costs of renting the hall, there were also advertising costs. Well, how about “still”? This was the main cost - $3,000. Plus rent. The result was a $1,200 loss. CAC turned out to be higher than LTV, if we speak in terms that we met today.

A problem that will always face you as long as your business is alive

Correct calculation and reduction of CAC. You will always have to solve this problem. You are like a tightrope walker who will have to walk and not fall into a too low SAC that cuts off the majority potential clients. Not too high, which can “gobble up” all the profit.

How to reduce CAC

1. Optimize your sales funnel.

Look at every step of your funnel, find weak points, advertising channels that give the least number of conversions, check the possibility of redistributing expenses on these channels in favor of more converting ones.

2. Optimize prices.

This is not about simply raising prices, although sometimes this is the most useful action. But it is worth paying attention to the structure of payments: advance payments, prepayment, regular payments. If this helps increase LTV, the “quality” of the client will automatically increase. Formally, CAC will not decrease, but will become more acceptable.

3. Develop content marketing.

Content marketing is one of the cheapest and most profitable long-term options for attracting customers. Introduce potential customers to your product, involve them in its use and discussion. The CAC of loyal customers is much lower, this must be used.

There are a huge variety of tools, counters and indicators to evaluate the effectiveness of advertising. To assess whether it is spent advertising budget in vain, first you need to decide on the goals of the advertising campaign. Then choose the tools. And finally evaluate the necessary marketing indicators. Stanislav Rybakov, founder and head of the marketing agency Increase, helps us understand all this.

— The legendary American businessman and one of the founders of modern advertising, John Wanamaker, noted back in the 19th century: “Half the money I spend on advertising is wasted. The only problem is that I don’t know what [half of the budget] is.”

Currently, there are a huge number of special tools for determining the effectiveness of advertising; the main thing is to know where to look for them, how to use them skillfully and which one to give preference to.

Setting priorities

Overloaded modern society advertising, we have created selective Internet users. Now they only pay attention to ads that have special value to them. So, to calculate whether our advertising is reaching target audience, first you need to decide on your goals. Having knowledge of the characteristics of the audience and having built a goal-setting system, we will be able to select reliable metrics for assessing the effectiveness of advertising.

For most commercial projects, the interest is in increasing sales, but for some, such as media, an increase in the number of visits will be enough. In this case, we will use visit control metrics until we achieve the desired goals or find new ones.

Selecting tools

To competently analyze the effectiveness of online advertising and obtain statistical data, it is important to choose the optimal set of tools.

Below are possible and popular tools today used to collect and store various types of statistics on Internet pages:

• Internal counters - located on the site itself, provide access to statistics in real time and guarantee the confidentiality of information. Such counters can be of your own design (to create you need to know a programming language, for example PHP), provided by a hosting platform or a separate service (CNStats)
• External counters are special script programs that communicate with a specialized statistical server when a site page is loaded. As a rule, these are free statistics services (,). Some of them allow you to participate in ratings, but require that a picture with the service logo be placed on the website (LiveInternet, Rambler, Mail.ru, OpenStat)
• Programs for analyzing Cookies - files containing dynamic information and remaining on the user’s computer (Cisco)
• Programs for analyzing Log files that record events on a website (Semonitor, AlterWind Log Analyzer, AWStats)
• Analysis systems that can comprehensively replace counters and log file analyzers (for example, such as “Site Statistics” from NetPromoter)
• Data statistics systems for online advertising campaigns (Yandex.Metrica, AdTracker, AdsControl, etc.), as well as sets of modern web analytics tools (free Google Analytics or Microsoft AdCenter)

We study performance indicators

Marketing indicators for assessing advertising effectiveness. To determine them, you need to visit the advertiser’s account or carefully study the interface of the page being studied.

The most popular marketing indicators for assessing advertising effectiveness are CTR and CR. In fact, there is nothing in common between these two abbreviation terms except the letters C and R. Let’s take a closer look at what these and other marketing metrics for assessing advertising effectiveness are.

1. Visit control metrics. The first and simplest indicator is the number of visits directly, although it only shows the tip of the iceberg. If advertising is used correctly, the number of visits should be at a constant level, otherwise the campaign should be optimized.

It is also important to pay attention to the audience by determining who is visiting the page, where your visitors are from, whether there are new guests and whether there are those who have returned to you again. Information about how long users view your page can also be a signal to edit the site due to identified content problems.

A useful tool for assessing effectiveness is a landing or sales page (landing page), which can be a separate page of an existing site or a specially created “one-page” site. The sales page becomes a kind of “hook” for the user, where he will either have to leave his contact information for further communication, or read more carefully individual goods at the request of the owner.

2. CTR (Click-Thru Rate) — click-through rate of advertising materials. CTR is a metric showing the effectiveness of advertising, expressed as a percentage of the number of clicks on an ad to the number of its appearances on the network. Naturally, the greater the number of impressions on the network, the greater the likelihood of increased visits. The CTR formula looks like this:

.

3.CR (Conversion Rate) — conversion rate. CR is rightfully considered the main indicator of the effectiveness of advertising campaigns, displaying the proportion of visitors who completed the target action after visiting the site through contextual advertising. Thus, if out of 100 visitors to a sales page, 10 people leave their phone number for feedback, the conversion rate will be 10%.

The conversion rate indicates the quality of advertising settings and the relevance of the services offered. If users become clients without any problems, advertising satisfies their needs, and the landing page is a means of solving their problems.

4. CPM (Cost Per Mille/Thousand) and CPC (Cost Per Click) — cost per thousand impressions and cost per transition. These are the simplest metrics for the cost of advertising campaigns.

In fact, CPM is the amount a client pays for an ad to appear online a thousand times. CPC is an average indicator, meaning that if during a certain period of time you received three transitions at a conditional price of 1.5, 2 and 2.5 rubles, then the average cost of the transition will be 2 rubles.

However, these indicators should not be considered as the main ones, since by setting yourself the goal of reducing the cost of transition, you may lose the quality and effectiveness of advertising as a whole.

We will consider additional indicators for determining advertising effectiveness below.

CPA (Cost Per Action or Cost Per Acquisition/Cost Per Lead/Cost Per Sale) — the cost of the target action. It is calculated as the result of dividing the amount of advertising expenses by the number of target actions performed (registration, subscription to the newsletter, trial period, etc.).

CPO (Cost Per Order) - order cost. This is one of the options for the CPA indicator - provided that the target action is a completed transaction. Calculation formula: the amount of advertising costs divided by the number of confirmed orders.

I would like to pay special attention social indicators(Social Metrics), which are determined by the number of mentions, for the most part, in in social networks. Currently, a campaign can be considered truly unsuccessful if, upon learning about it, users do not share information on Facebook or Twitter, do not subscribe to accounts on one or another social platform, and are not active, leaving comments and likes.

Financial indicators of the effectiveness of online advertising. Their calculation is only possible if you have a customer relationship management (CRM) system and accounting data. As mentioned earlier, to work with this group of metrics you need to have information about the number of sales. The indicators presented below are qualitative and quantitative characteristics of advertising. In addition to them, there are simpler quantitative metrics for assessing the effectiveness of campaigns: the number of transactions, the number of attracted customers, the number of product units sold, etc.

1. ROI (Return On Investment) and ROMI (Return on Marketing Investment) — return on investment in advertising

What is the difference between these indicators? In fact, the difference between these concepts is small, since the term ROI is more general, while ROMI remains a more universal name for the metric. Return on investment in marketing is calculated using the same formula as ROI, but does not take into account financial and accounting costs, logistics costs - in other words, things that do not relate to the marketing area.

Thus, one of the main indicators of the effectiveness of an advertising campaign - return on investment in advertising - is calculated as a percentage according to the following principle:

2. LTV (Lifetime Value) — customer lifetime value , CAC (Customer Acquisition Cost) — cost of attracting a client

LTV is the most important financial indicator that evaluates investments in advertising and determines the amount of income from the average client over the entire period of cooperation with the company. Let's dwell on a simpler formula for estimating the value of a client over a certain period of time, where the total amount of the company's profit is divided by the number of clients.

CAC is calculated by dividing the amount of investment in advertising by the number of attracted customers. By tracking the dynamics of the indicator, you can judge the effectiveness of advertising. Growth indicates a decrease in efficiency, a decrease in the relevance of the product and an increase in the activity of competitors. The fall means an increase in advertising efficiency, respectively.

Particular importance is attached to the ratio of LTV to CAC, which determines the feasibility of using marketing tools for a long time. An example of such a calculation: if the lifetime value of a customer is 50 rubles, and the cost of acquisition is 20 rubles, the ratio of LTV and CAC is 2.5.

If the result of the calculation is less than 3, use marketing tool considered ineffective in its long term. To improve the situation and solve problems that have arisen, it is necessary to review the settings of advertising campaigns, as well as pay attention to the quality of customer service.

conclusions

When selecting a set of metrics to track and evaluate the effectiveness of advertising campaigns, it is always worth remembering that it is the entrepreneur who decides for himself, what results he considers positive. It is important to understand that effective advertising on the Internet should bring a significant return on investment. However, this does not mean that the results already achieved are maximum: any effectiveness can always be doubled.

One way to increase efficiency is to work with the presentation structure of the advertising unit. Another possibility is to reduce agency costs by eliminating the most expensive and ineffective means of attracting clients to the customer.

Competent complex work with content and tracking relevant performance indicators with clearly defined goals will undoubtedly lead to the desired results.

The company's clients: from the first transaction to the formation of client assets

Customers are the lifeblood of any company. Most of cash flow is formed from customer payments. Therefore, clients and the system of working with them become a priority task of modern marketing.

There are three stages of working with clients, during which the company moves from single transactions to the formation of stable mutually beneficial relationships with promising clients (Fig. 5.1):

• 1) attracting clients;
• 2) customer retention;
• 3) development of relationships.

Rice. 5.1.

In a growing market or/and in early stages the company sets its life cycle as a priority attraction new clients. Managers are primarily interested in the volume and dynamics of sales and gaining market share. The company spends money to attract clients, marketing budgets maximum. At the same time, very often companies are ready to interact with any client, even a not very profitable one. The number of attracted clients and the market share occupied are the main indicators of the effectiveness of marketing processes at the attraction stage. Market share - the ratio of the sales volume of a given product category of the company to the total sales volume in the market, expressed as a percentage.

However, as the market saturates and the level of self-sufficiency is achieved, the efficiency of operations becomes a priority management task. For marketing, this means focusing less on attracting new customers and more on retention existing. The main indicator of performance is the level of customer retention. Retention level The customer retention rate is determined by the percentage of the number of customers who made purchases during the previous period to the number of those who purchase goods in the current period. High level retention generally indicates that customers are loyal to the company and prefer to stay with the company in the future.

In the long term, the company strives to maximize the period of cooperation with the client. It is clear to most executives that customer commitment is critical to business success. This stage can be called stage of development of the relationship with the client. Creating sustainable partnerships with loyal customers brings greater profits than single transactions and maximizing profits for each individual contract. The main performance indicator at this stage is the customer lifetime value indicator. Customer lifetime value (CLV - customer lifetime value) is the customer's net present value - the discounted value of cash flows created during the cooperation. As a result, from single actions to attract customers, the company's customer assets are consistently formed, consisting of customers who, due to their commitment, serve as a source of sustainable long-term cash flow from purchases made by them. Company's client capital (customer equity) is a monetary valuation of the company’s client assets, defined as the sum of the CLV of all current and future clients of the company. Let's consider each of the stages in detail.