Question

Calculate some of the standard customer acquisition costs across different types of channels: (conversion rate means the percentage of people who purchased the item among all the people who watched the ad)

1. Google Ads have an average cost per website click of $1.50 and average % conversion rate of those website clicks of 2.2%.

2. Facebook Ads have an average cost per website click of $0.27 and an average % conversion rate of 1%.

3. Mailing flyers will cost 3 minutes of time charged out at $10 per hour, and that flyers have a 1% conversion rate.

4. Personal selling through warm introductions and targeted customer outreach requires 10 minutes of time per customer and has a 20% conversion rate.

Answer 1

(1) Average Cost = $ 1.5 per click and Average Conversion Rate = 2.2 %

Therefore, customer acquisition cost (CAC) = 1.5 / 0.022 = $ 68.182 approximately per customer

(2) Average Cost = $ 0.27 per click and Average Conversion Rate = 1 %

CAC = 0.27 / 0.01 = $ 27 per customer

(3) Average Cost = 3 miniutes at $ 10 per hour and Average Conversion Rate = 1 %

CAC = [3 x (10/60)] / 0.01 = $ 50 per customer

(4) Average Time = 10 minutes and Average Conversion Rate = 20 %

CAC = 10 / 0.2 = 50 minutes per customer