One Key Metric: customer acquisition cost
Are you spending too much money on marketing?
Maybe yes. Maybe no.
When you are trying to figure this out, you might consider customer acquisition cost as the key metric to start with.
You marketing folks will want to talk about cost per lead. And Sales will think about “reasonable commissions” and how many leads they can convert.
But as a business owner, the number that really matters is how much did it cost you to get a new customer? And how does that cost compare to how much money you’ll actually make from that customer?
After all, if it costs you $200 per customer, and you only get $200 profit from that customer, you’re not going to stay in business.
Clearly, once you have this number, you’ll need to dig down deeper. Where’s the issue? And to solve the issue, you’ll need to make sure that sales and marketing are properly aligned.
But you need a place to start. And this one number summarizes all your sales and marketing efforts into one place, giving you a sense of whether or not you’re sustainable.
So, we need to start here. And then we can start digging.