MEASURE WHAT MATTERS
CAC over CPL: Get the full picture of your marketing spending!
Contractors often face a unique set of challenges when it comes to marketing their businesses. With limited time and resources, it can be frustrating to invest in marketing efforts that don’t produce the desired results. From generating leads to converting them into paying customers, the entire customer
acquisition process can feel overwhelming and leave contractors feeling like they’re spinning their wheels.
Marketing companies may focus on cost per lead (CPL) as a metric because it is a straightforward way to measure the cost of generating potential customer contact information.
What is CPL?
- Cost Per Lead is calculated by dividing the total cost of a marketing campaign by the number of leads generated.
- Cost per lead (CPL) only measures the cost of generating a potential customer’s contact information.
- CPL doesn’t take into account whether those leads convert into actual paying customers or not.
What is CAC?
- Customer acquisition cost (CAC) is a more comprehensive metric compared to cost per lead (CPL) when it comes to evaluating the effectiveness of your business’s marketing and sales efforts.
In contrast, CAC takes into account the total cost incurred to acquire a new customer, including all marketing and sales expenses, which provides a more accurate picture of the effectiveness of a business’s marketing and sales efforts.
By calculating the CAC, a business can determine whether the cost of acquiring a customer is worth it compared to the revenue generated from that customer.
At the end of the day we want Customers! Not a huge volume of leads that don’t turn into Customers!
This metric takes into account the entire customer acquisition process, including lead generation, lead nurturing, and conversion.
For instance, your business may spend a small amount of money on generating leads through online advertising or social media marketing, which may result in a low CPL. However, if those leads don’t convert into paying customers, the business’s overall profitability may suffer. In contrast, by focusing on optimizing the entire customer acquisition process, including lead nurturing and conversion, a business can lower its CAC and improve its overall profitability.
In summary, while cost per lead can be useful in measuring lead generation efforts, however customer acquisition cost (CAC) provides a more accurate picture of the effectiveness of a business’s overall marketing and sales efforts.
By focusing on lowering the CAC and optimizing the entire customer acquisition process, a business can improve its profitability and long-term success.
Stay tuned for Part 2, that will share strategies on how to lower your Customer Acquisition Costs (CAC).
