How Do I Optimize My CAC?
Attempting to reduce customer acquisition cost is easier said than done. In addition to traditional costs such as marketing expenses and employee salaries, time based costs such as the level of touch required to close a deal can increase your CAC dramatically. However, let’s look at how we can mitigate CAC and turn prospects into loyal, paying customers that contribute regularly to your revenue stream.
1. Quantify your proper customer persona - this is huge
Hundreds of articles have been written to help you define your customer personas. Yet, most of them fall short of a few 60 minute brainstorming sessions that culminate in some really pretty powerpoint decks, but very little traction into knowing thy customer. As such, it’s crucial for you to quantify the range of customer personas you could serve as early as even the initial customer development process.
You should know roughly the length of your sales cycle required for an optimal conversion rate, how much that customer is willing to pay and their price sensitivity, and even the proportion of those potential customers coming through your site. Furthermore, you should know what moves those customers to buy, what features they find most valuable, etc. Do this on a quantitative level though, not just guessing.
2. Optimize your funnel
Optimizing your sales and marketing funnel seems like one of the easier exercises for you to do, because you essentially have complete control over the process. Keep in mind though that optimizing for the wrong customer won’t do you much good in the long run, so make sure you focus on point one first.
That being said, you need to quantify each step of the process, and also understand exactly how many visits lead to leads, how many leads lead to opportunities, and how many opportunities lead to customers. Focusing on those three main areas provides a fulcrum for you to focus on different stages and experiment from with different channels, sales practices, etc.
Experimentation is key, but also keep in mind that you want to automate as much as possible. Hundreds of products exist to help in this effort (HubSpot, Help Scout, Salesforce, etc.). Find what works for you and what you need for each stage of your funnel and improve your efficiency as much as possible.