Remember that your internet marketing or network marketing business is a BUSINESS. First you should have a good solid plan on how to get customers. This should be plainly listed and spelled out step by step, with tasks to accomplish every day that will lead you to your goals. Some action steps will be free, but some will cost money (and truth be told, you should have a marketing budget, even if it’s small to begin with). But how do you know how well your plan is doing?
Well, if you ever asked for investment funding from a bank or investor (sometimes called “angel investors”) they ask key questions to gauge how your business is doing. Shouldn’t you do the same? Whether you are a network marketer, internet marketer, or just own a self-funded small business, you need to be able to know how to gather this information so you can see where your money is going, gauge your progress and then make educated decisions as to what changes you want to make going forward. Not many network marketing training courses cover this information, but it’s important to have.
One question that will be asked is – what is your customer acquisition cost?
Customer Acquisition Cost (CAC) or Cost of Customer Acquisition
This is simply the amount of money you spend to acquire a customer. For network marketers (MLM), this could also mean adding a distributor to your team as well.
In the case of our industry, almost every cost is considered a CAC. For example:
• Online advertisements: cost per click (cpc)
• Purchasing leads: cost per lead
• Memberships to websites that assist you in generating or managing leads
• Product purchased for samples
• Business products: flyers, CDs, DVDs, etc. purchased to give to leads
Please note that this is only a short list!
How do you figure out your CAC? Simply list your expenses in a spreadsheet for a given month and divide that by the number of customers. So, if you spent $100 in leads and online advertisements in a given month and gained 10 customers, that would be a CAC of $10.
Keep in mind that as you get more experience and training in internet & network marketing, your CAC will surely decrease (which is a good thing). Today you may place an online ad that costs you $0.20 per click, but 6 months later, your ads may cost you $.05 per click simply because you gained education and experience that helped decrease the cost of your ads. For an offline effort, perhaps you hosted a presentation, and out of 100 invites got 10 customers. After some training with your upline, outside coaching or course, your next presentation generated 40 customers out of 100 invites. The cost to host the presentation was the same, but because you gained more customers, your CAC decreased tremendously.
Understanding and knowing your CAC will tell you whether your efforts over time are improving – or if they aren’t, then don’t give up! Make small changes to test results and definitely get more training. Network marketing is a profession like any other. Take the time and effort to learn as much as you can, from your primary company and outside experts.