Knowing how much you spend on acquiring new customers is essential to figuring out business profitability, but your customer acquisition cost (CAC) isn’t the only telling metric for your bottom line. Your marketing percentage of customer acquisition cost (M%-CAC) is an equally important calculation, and when reviewed against your CAC, provides the full picture of just how much you’re spending to obtain new clients.
What is Marketing Percentage of Customer Acquisition Cost?
The marketing percentage of CAC tells you how much of your marketing budget is spent on bringing in new customers. Essentially, the M%-CAC formula is a way to calculate the ROI of your marketing efforts. It’s a significant metric to consider when analyzing recently completed campaigns to determine overall marketing effectiveness.
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Understanding the Results of M%-CAC
Generally speaking, the lower your marketing percentage of CAC, the better.
Possible explanations for a high M%-CAC include:
- Your sales team isn’t closing marketing qualified leads (MQLs) effectively
- You’re overspending a limited marketing budget
- You’ve invested in marketing substantially to acquire better leads for your sales team
Tracking your M%-CAC over time will also reveal whether your budget is concentrated more on your sales team or your marketing team, or if your costs are more evenly divided. An increase in M%-CAC means that the costs of your marketing department have gone up, while a decrease might indicate you’re spending more on sales than you have in the past.
The quantity of new customers your company brings in is often a direct result of your marketing. While a surplus of new business is always exciting, it’s important to assess how much of your budget is being used for acquisition. By comparing the costs of your marketing campaigns with the costs of customer acquisition, you can figure out just how effective your strategies have been and whether those efforts are a win for your overall ROI.