Reducing CAC is one of the biggest challenges for companies. After all, investing less to achieve more , and this is a metric that largely determines a business's financial health.
CAC, Customer Acquisition Cost, can vary each month and with each defined strategy, but it is a fact that this investment can be reduced if businesses truly start to put the customer at the center and invest in what matters most: the experience.
Have you ever considered how investing in experience is directly linked to the challenge of reducing CAC and continuing to profit in the sector? Let's talk more about this topic—stay tuned!
What is Customer Acquisition Cost, CAC?
Before we actually talk about reducing CAC, it's important to review this concept. After all, there are many acronyms and metrics in everyday business, right? CAC, or Customer Acquisition Cost , as its name suggests, refers to the amount a company invests to acquire new customers for its brand.
This cost encompasses the entire workload of teams at each stage of the funnel. This includes everything from efforts to attract visitors, acquire and nurture leads, to closing the purchase.
CAC varies across businesses; each organization has its own way of investing resources and efforts to reach customers. However, it's safe to say that this tends to be a metric that unites sales and marketing.
It's also worth noting that many companies miscalculate their CAC and don't rely on real numbers because they only account for expenses on paid media and tools, for example. To calculate a real CAC, you need to go further and remember that people, salaries, events, PR, travel, and any other actions that are part of the process of acquiring new customers must be factored into the calculation.
By having numbers and surveys of each moment of this process for a given period (it is recommended to calculate monthly), the CAC can be calculated simply using the formula:
CAC = Total investments / number of new customers
CAC as an important decision-making driver
Like any metric, CAC is an important guideline for defining strategies, processes, and people. And of course, it's not enough to simply calculate your CAC every month and keep it in spreadsheets. After all, this is an important number that can reveal a lot about the health of your business and its direction.
It's clear that the CAC value needs to be lower than the average value of your product or service. After all, a company can't spend more than it earns, right? Therefore, more than demonstrating whether the company is profitable, the CAC provides visibility so that strategies can be compared.
Imagine that one month your business invested in events and the next month it focused on paid advertising. Of course, CAC isn't the only factor to analyze, but its results will certainly provide valuable insights into what makes sense for your process and your audience. Does that make sense?
How to reduce CAC?
Now that you know more about what CAC is and its importance to business strategy, let's talk about what matters—and is the biggest challenge—for companies: how to reduce CAC.
When we talk about reducing CAC, it's not just about stopping investing in sales or marketing—after all, these are crucial tasks for bringing people into the business—but rather about investing more strategically so that the results are increasingly positive.
There are several possibilities for reducing this metric in the business, but what we will bring here in this content is to look differently at word of mouth (referrals) and customer experience , these are the two strategies that bring the most significant results in reducing CAC.
Word of Mouth and Customer Experience to Reduce CAC
There may be many ways for a company to reach a person, but even though years go by and new technologies and channels emerge, nothing as effective as word of mouth has yet been invented.
Of course, it improves every day through reviews, or evaluations , but recommendations remain the best way for people to learn about and trust a place, after all, other people have already spoken about it. Proof of this is that, according to Reclame Aqui , 70% of people say that opinions and reviews are the sources they trust most when researching a product or service they're considering purchasing.
And people don't just like research: according to a study by Grupo Consumoteca, 80% of consumers consider it essential that the brand or product they are interested in has positive reviews from other buyers before making their decisions.
In other words, the way word of mouth – or buzz marketing – happens today may be more digitalized, but it still exists, and referrals are still one of the simplest and cheapest ways to win over – and retain – new customers.
According to a study published in the Journal of Marketing , referred customers are 25% more profitable and 18% less likely to cancel the product or service .
In other words, to reduce CAC and win more customers for less, it's crucial to invest in referrals from your customers . How can this be done? Through experience and relationships!
According to a Consumoteca study, 51% of consumers write a review about a product, brand, or store when they're satisfied with their purchase. This demonstrates that people are willing to recommend products and places they like, and to achieve this, you need to differentiate yourself by being the company consumers are willing to speak highly of, spontaneously.
Here, it's much more than selling a product or service, but rather about selling a personalized and memorable experience, as well as a close relationship that demonstrates how important the customer is to your business and not just another number.
Consumers are increasingly demanding and willing to pay more for experiences: according to research by Reclame Aqui, 51.2% of consumers say they would not mind paying more for a product as long as they had a better shopping experience with the brand .
More than that, 73% of customers would switch to a competitor after several bad experiences. In other words, not investing in customer experience means more than just not being recommended; it also means losing the customers your business has invested in in the past.
We can say that investing in customer experience is also investing in:
- Internal business cultures;
- Know and truly understand who your customer is to outline personalized strategies that are consistent with their journey ;
- Strengthening relationships so that sales are more than just a number, but also a journey of loyalty;
- Customer service , after all, being available and serving the customer well is one of the great thermometers of experience;
- Technologies that are aligned with the business to automate—without losing the human touch—to be even more available, close, and personalized to your customer base.
Investing in referrals, loyalty , and experience is a strategic and intelligent way to reduce CAC . After all, satisfied customers stay with a business and become brand ambassadors , multiplying the investment already made in customer acquisition and returning results to the business.
Considering everything we've discussed here, how much does your customer truly play a central role in your brand? Are they a key player in improving your metrics and results? Now that you know more about how to reduce CAC, take a look at your processes, understand what can be improved, and count on Harmo to transform your customers into your biggest online salespeople!
