No Money — No Honey: How to Calculate Customer Acquisition Budget
How do you understand how much money to invest in customer acquisition? Today, we share the simple formula of calculation. Take it into consideration to promote your product successfully.
Every online business has fixed marketing costs such as pay per domain or hosting, investments in ad campaigns, analytics expenses. It may also include a fee for the services of the marketing agency or SEO experts.
However, you can’t develop the business on the Internet without expenses on your website and advertising. Without analytics, you don’t know which ad campaigns are performing the best. We saw situations when the 80% of customer acquisition budget wasn’t paying off. The ideal marketing strategy is to invest in advertising and get 2 or 3 new clients.
So don’t make the same mistakes twice. Let’s take a look at two important points.
- Fast way to calculate customer acquisition investments.
- Optimization of expenses on analytics tools.
There’re many various ways to determine a budget but most of them are pretty complicated. They include up to 10 different indicators and difficult calculating.
We recommend to apply a simple and fast calculation formula. It allows to understand how much you have to invest in promotion to return your investments. Consider:
- planned number of deals or sales for the chosen period (week, month, quarter, year);
- AOV (average order value);
- the percentage of margin;
- the percentage of marketing costs.
Here’s the example of budget calculation. Mary is the marketer at the language school. She wants to figure out a profitable customer acquisition budget for the next month.
- According to the plan, 40 people clients have to pay for French lessons.
- The average price of French course per months is 100 dollars.
- After paying the salaries to teachers, rental charges, and other fixed costs a net profit is 30% of gross revenue. It’s 1200 dollars.
- The language allocates 10% of gross revenue to marketing. In average, companies allocate 10-20% of revenue to it. These investments may be higher if you want.
This sum is profitable for promotion investments. You may launch a few PPC campaigns. As most clients register over the phone, it’s highly recommended to allocate the percentage of revenue to call analytics. Thus, a marketer may determine the campaign and keywords that brought to sales.
That was an example of monthly budget calculation. But it’s more convenient to set up a yearly budget. Why? Here are the reasons:
- You may come up with a long-term strategy in advance.
- You don’t need to regularly confirm the payment for the different services.
- If you use web analytics services, you may pay for a long period and forget about the related hassle. Thus, you don’t risk to face up with raising tariffs.
Why it’s worth including analytics to the fixed costs of customer allocation budget
- The work without analytics is like a wild stab in the dark. You can’t just collect statistics at once, set up advertising and get a profit. Now, the advertising brings in calls and sales but in the future, it won’t. The demand is constantly changing. New competitors are coming out. The cost per click is ranging. Analytics tools allow to promptly notice changes and benefit from the received information.
- If you pay for a long-time subscription, you may significantly save up your money. For example, the 3-year Ringostat subscription allows to save up to 40%.
- If you constantly use a specific analytics tool, you get the assistance of experts who know your pains and how to work with them. That’s especially valuable if the service has cool Customer Support Team.
If you want to use call analytics but you’re not confident that’s profitable for your business, ask our salespeople (firstname.lastname@example.org) or chat with us on the website. We’ll calculate return on investment for implementing Ringostat. We recommend using our service only to those who really need it.