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How is your organization performing in terms of marketing % of customer acquisitions cost?

Posted by Julie Kiffmeyer on Jan 26, 2015 8:26:53 AM

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We know that marketing spend has great ramifications on acquisition of customers. How much I spend on Marketing-Spendadvertising, price and non price promotions, sales team expenses and any other marketing overheads will ultimately determine how many and what type of customers I will acquire in the long run.

For me to appreciate the effect of marketing spend on customer acquisition, I should be able to establish my organization's marketing % of customer acquisitions cost (which is the marketing portion of my total Customer Acquisition Cost (CAC), calculated as a percentage of my total Customer Acquisition Cost.) Customer Acquisition Cost is the total average cost my company would spend to acquire a new customer. This would be calculated by taking my total sales and marketing spend for a specific period of time divided by the number of new customers for that particular time period.

The question then becomes, how do I calculate my marketing percentage of Customer Acquisition Cost (M%-CAC)? I will take all my marketing costs and divide by the total sales and marketing costs I used to compute Customer Acquisition Cost.

Marketing_Percentage_of_Customer_Acquisition_001

Marketing Costs entail expenses, salaries, commissions & bonuses and all overheads for the marketing department only. Sales and Marketing Costs entail program and advertising spend, salaries, commissions & bonuses and overheads in a month,quarter or a year.

My marketing % of customer acquisition cost will show how my marketing teams' performance and spending impact on my overall customer acquisition cost.

An increase in this percentage can mean a number of things among them:

  1. My sales team could have under performed and thus received lower commissions and/or bonuses
  2. My marketing team is spending too much or has too much overhead.
  3. I am in an investment phase, spending more on marketing to provide more high quality leads and improve my sales productivity.

A reduction in this percentage can also mean several things about my organization:

  1. My sales team is spending less, and that there's less overhead.
  2. My organization is beyond the investment phase and my sales productivity is where it ought to be.

How is your organization performing in terms of marketing % of customer acquisitions cost?

Topics: Metrics