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As a CEO, you know that good customers are the lifeblood of any business. But have you ever stopped to consider how much you would be willing to pay for one? It’s a question that every business leader needs to answer in order to develop a successful marketing strategy.
What is a new customer worth to you?
CAQ stands for Cost of Acquisition in marketing. It is a metric that calculates the cost of acquiring a new customer for a business. In simple terms, it refers to the amount of money a company spends to gain one new customer.
For instance, let’s say a company spends $1,000 on advertising and marketing campaigns in a month and acquires 20 new customers during that period. Their CAQ is calculated by dividing the total amount spent on advertising and marketing ($1,000) by the number of new customers acquired (20), which gives a CAQ of $50.
According to a study by Deloitte, acquiring a new customer can cost five times more than retaining an existing customer. This highlights the importance of calculating CAQ and developing effective marketing strategies that focus on customer retention.
Not All Customers Have The Same CAQ
Another example would be a business that sells products with different price points. If a company sells products worth $10 and products worth $100, the cost of acquisition for a customer who purchases a $100 product would be higher compared to a customer who purchases a $10 product. Therefore, the CAQ would vary based on the price point of the product.
What is Customer Lifetime Value (CLV)?
CLV is a metric that measures the total value that a customer brings to a business over time and it is closely connected to CAQ. A study by McKinsey found that companies that excel at customer acquisition also have a higher customer lifetime value (CLV). This implies that a company’s ability to attract and retain customers has a direct impact on its profitability.
You Need A Great Marketing Strategy to Succeed
Calculating CAQ is essential for businesses as it helps them determine the return on investment (ROI) for their marketing efforts. By knowing how much it costs to acquire a new customer, a company can create an accurate budget and optimize its marketing strategies to reduce the cost of acquiring new customers.
A study by HubSpot in 2021 found that businesses with effective content marketing strategies can achieve up to 3 times more leads and 6 times more conversion rates compared to those without content marketing strategies
However, it’s important to remember that you’re not the only one trying to attract new customers. Your competition is also vying for their attention too. This is why it’s crucial to have a solid marketing strategy in place to get the most out of your budget.
GlobalSense is a foreign managed digital marketing company based in Taichung that helps Taiwan exporters succeed in the challenging global business environment. If you would like help analyzing your CAQ, researching your competitors and developing a winning marketing strategy for your business, then please contact us.