Knowing who your customers are and how much it costs you to acquire new customers should be a key part of your overall business strategy. The average customer acquisition cost for HVAC customers ranges between $200 and $300. But what goes into that cost?
Customer acquisition costs can include advertising costs, man-hours, time, and more. Understanding how much it costs to acquire a new customer helps you understand when your HVAC business will reach a profit.
In this article, we’ll explain the cost of acquiring customers. You can use this information to help optimize your profit margin and marketing ROI.
How to Calculate Customer Acquisition Cost
You can calculate your customer acquisition costs (CAC) by dividing total marketing expenses by the number of new clients acquired within a specific period. Marketing expenses include every dollar that you spend to promote your company. The costs include:
- Publishing Costs. Money spent to publish marketing materials, such as brochures, leaflets, flyers, and newsletters.
- Cost of Your Sales Team. This includes hiring expenses and salaries of the sales employees.
- Creative Costs. This is the cost of hiring marketing creatives, such as graphic designers and content creators.
Customer acquisition cost is a key component of customer lifetime value. Customer lifetime value is the amount of money a customer will spend with your company over the lifetime of your relationship.
At the same time, you need to calculate the customer acquisition cost for each channel. You should dedicate more resources to the tactic with the lowest CAC.
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Customer Acquisition vs. Retention
Although both customer acquisition and customer retention measure return on investment, the two phrases mean different things. Customer acquisition refers to the process of converting a potential customer to one that will pay for your services. Customer retention cost is the money spent on nurturing the relationship with an existing customer to continue purchasing.
Businesses must learn to balance retention and acquisition expenses. Generally, customer acquisition costs are higher and more important than customer retention costs. In addition, customer retention costs depend less on price changes and more on long-term loyalty.
How to Lower Customer Acquisition Cost
Every business aspires to reduce its customer acquisition costs to increase profits. Here are four ways to help reduce your customer acquisition costs.
1. Be Active Online
Commenting on other blog posts can increase the visibility of your brand. You can start by identifying the four most popular blog sites in your niche. Your target is to comment on as many of their blog posts as possible. Readers will start to notice your brand, especially if your comments provide additional insights.
2. Community Events
Get involved in the community. Being an active part of the community is a great way to get your brand name out there. Take part in fun local events, whether you have a table at the event or simply donate to it. This will help generate buzz around town which will increase referrals—which have little to no cost.
3. Speaking Engagements
A speaking engagement is where you deliver a presentation on a specific topic to a group of people. Local businesses can organize seminars where experts speak about an emerging or trending subject. If you are an expert on a home service subject, you can get paid to speak at these seminars.
The real benefit is that you will establish your business as a credible source of information in your industry. Your credibility will increase, encouraging listeners to use your business’s services.
4. Google My Business
Your home service business can create a free Google My Business Account and use it to market your business. When you create a Google Business profile, potential customers will be able to find your business on local sections of Google Search results and Google Maps. Since you want your business to rank higher on local search results or Google Maps, you need to verify your identity.
People will be able to see your business’s physical and web address on Google local listings. In addition, they will see previous customer comments and reviews, opening hours, and phone contacts.
Every business needs to attract new customers to boost sales and expand into new markets. Understanding the cost of customer acquisition and how to reduce it will make your marketing strategies smarter. Pairing that data with your customer lifecycle value data will help you invest in pursuing customers that are the best fit for your business.