How to reduce your startup’s CAC?

Understand the importance of calculating your company's Customer Acquisition Cost and learn about some strategies to improve this index and boost the growth of your business

Financial decisions, profitability analysis, how much you can and should invest in marketing... These are some of the many challenges for startups win new customers without compromising your budget. At this time, track metrics customer conversion and CAC (Customer Acquisition Cost) help to understand the viability of a business and direct decision making so that a company prospers and establishes itself in the market.

A startup's CAC directly impacts the sustainability of the business, depending on the return, profit margin on sales and the life cycle of these customers. In this post you will learn about the importance of calculating CAC and some strategies you can implement to improve this index and boost your company's growth.

What is CAC and why is it important for your startup?

Customer Acquisition Cost is a metric used to determine how effective a company's marketing and sales actions are. CAC is calculated by dividing the total investment for customer acquisition by the number of new customers acquired with that investment. The result of this account indicates whether your company's business is healthy or not.

The sum of investments to calculate the CAC must only take into account the marketing and sales area and the actions directly involved in the customer acquisition strategy. Administrative area, SAC and product development costs, for example, should not be included in this account. The same logic applies to the number of customers acquired.

Regarding the frequency of CAC calculation, each company will have the one that makes the most sense for its business model. And it is based on these results that your team will optimize investments and base decision-making strategies in attracting customers.

Lifetime Value

Another important data is the LTV or the Lifetime Value, which is the value that a customer left in your company when purchasing a product or service during the period in which he consumed them. The LTV calculation is made by multiplying the average sale value by the customer retention time.

 Experts consider that a healthy relationship between LTV and CAC must be greater than 3. If the startup's CAC approaches the LTV, it is a sign that there are losses in some area. This relationship is essential to know whether the company is spending more or less to acquire customers and retain them.

With this data in hand, it is possible to evaluate profitability, make projections and redefine strategies in time to avoid losses, in addition to strengthening the company when negotiating with suppliers and selling.

Strategies to reduce startup CAC

There are several strategies that aim to reduce a startup's CAC, such as improving sales through marketing, investing in actions aimed at increasing the specialization of its sales teams, or even ensuring quality service. After all, the satisfied customer With the service you can become a fan of your brand and end up coming back to close new deals.

Each company needs to figure out the best way to review its strategies, but here are some clues on where you can start:

● Optimize content marketing

The production of relevant content, with SEO techniques (Search Engineering Optimization) on your brand's blog and strategic use of keywords can attract organic traffic, which is great for reducing your startup's CAC. With this strategy, your content can reach a more qualified audience that is already searching for your content and, therefore, is prepared to purchase. What search engines do is speed up this encounter, bringing the public to you.

Furthermore, try to eliminate unnecessary steps or barriers in the conversion process, simplifying the process so that this potential customer does not give up on your product or service.

● Maximize conversion leads in customers

Metrics about conversion rates at each touchpoint with your leads and customers are important to know where service needs to improve and inform decisions. Opening emails, clicks, completing landing pages and converting into sales are important results that help track the customer journey. leads towards purchase and reduce wasted investment.

It is necessary to test different approaches, layouts and colors of pages and arts, CTAs (Call-to-action) and elements to see what is most effective when purchasing. Don't be afraid to dare and test.

● Make strategic partnerships

Partnering with other companies, influencers or organizations in your niche or that have some relationship with your core business can help reduce customer acquisition costs. Influencers, for example, have access to a qualified and interested audience, in addition to providing credibility and trust.

In relation to companies, you can form partnerships for joint advertising (colabs). This way, your company has access to new networks and marketing channels and both organizations benefit, as they reach new audiences and marketing costs are more diluted. A complementary expertise It is also an advantage to develop projects together, share knowledge and offer services that complement each other. 

Being part of the iFood Ecosystem, for example, is an advantage for startups, which are strengthened in the innovation market, and also for iFood, which can incorporate new solutions to offer more efficient services aligned with consumer demands.

iFood Labs is the hub responsible for testing, co-developing and invest in new solutions. The success of a startup depends on the implementation of strategies to reduce CAC and also the consolidation of a product or service in the market.

Connecting with iFood Labs can bring great results for your business, increasing customer acquisition efficiency and driving growth.

Send your pitch for iFood Labs!

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