Know Your Customer Acquisition Cost

Do you know how much it costs for your business to acquire a new customer online and offline?

If you have a handle on this number, I imagine you also know your average customer value.

Hopefully, it's a larger number!

3 Ways Of Calculating Average Customer Value

Different businesses determine their average customer value in a number of ways. For example, a B&B owner may decide that whilst some guests do return for another stay, it's best to base their average customer value on just the one visit. Contrast this to the designer fashion shop, where an average customer may make a further 2 purchases over the next 3 months. Next, take the roofing company where the sale will typically be a one-off. Generally, there will be no repeat business but the sale is four or five figures.

Armed with this information I would like to help you consider ways in which you can acquire new customers online.

Understanding How Your Customers Search

Let's take a look at the 3 different types of person searching online that may become your future clients.

We can segment this person by the search queries they enter into Google.

For this exercise, I have taken someone with back pain.

If they enter "chiropractor in St Andrews" into Google, I like to say they are in the buying mode and typically they are the best kind of visitor for you.

They know exactly what they want, and they want to take action now.

Here in St Andrews, we have many B&Bs and thus in this market, you would say those in the buying mode are people that search on a phrase like "book St Andrews B&B". 

Now when they enter a search query like "St Andrews B&B reviews", I categorise this as the research mode where they feel they need more information before making their buying decision.

Finally, when someone enters a query like "St Andrews holiday", I call this the interest mode. It's early days, and at this stage, they are deciding between a B&B, guest house and a hotel.

Thus for your practice a research mode query would be "osteopath reviews" or "best chiropractor".

Therefore queries like "treat back pain" and "back pain treatment" would be interest type queries.

Google will charge you different amounts for all of these keywords. Typically the ones in the buying mode will be more expensive, but please don't look at these costs in isolation. If the total customer acquisition cost (number of clicks to get the sale times the cost per click) is less than your new acquisition cost, you are definitely on the right path and will be profitable!

The Wrong Way To Run A Google Ads Campaign

I do sometimes tear my hair out when a business owner complains they paid too much for their clicks without taking their customer acquisition costs into account. This is the wrong way to run a Google Ads campaign and we should take a leaf out of the way the large insurance companies advertise on Google.

Learn From Gocompare.com and Directline

Whilst they may be paying anywhere between £25 and £50 per click, you can bet they are making a profit because they know their new customer acquisition costs.

Running a profitable Google Ads campaign involves understanding and tracking your sales conversions. Each keyword you bid on will result in a different customer acquisition cost, the important thing is that you ensure they are all profitable. Hence running a Google Ads account takes daily management as you find the winning keywords and dump the losers.