Customer Acquisition Cost for a new Website

--- Apologies if this is too simplistic for you but here's how I think of it:

• How much does it cost to get a person to your site?
• What percentage of the people that get to your site convert to a customer?
• Do the math and you'll get the cost per customer. Let's say it costs $2 to get each person to your site, 10% conversion, then you're spending $20 to get 10 people to your site, 1 of which will become a customer. So you have a $20 customer acquisition cost.

Now when you don't know those variables you can fill in with general industry standards to guesstimate, then as you get more data, replace estimated numbers in the equation with actuals until there are no more guesses.

--- So on the "how much does it cost to get a person to your site?" There are ranges of clickthroughs from different marketing tactics that are seen as typical. These will be affected by your industry, offer, competition and many other factors. A few clickthrough rates to give you a ballpark idea:

• SEM: Range .50% - 1%; (This doesn't really affect your cost because you're paying per click but you do need to know how effective your ad creative is. Find costs for keywords you'd be targeting, add about 10% to that cost for analytics screwiness and that's roughly the cost to get a person to your site or landing page.)

• Ad banners: Range .25% - .75% (So if you spend $1,000 for 100,000 ad impressions - which is a $10CPM and you expect to get a good response, you might generate 500 visits or .5% clickthrough rate.

• E Newsletters / Email: Range 1% - 5%

--- Now you determine what percentage off those people coming to your site will become a customer. Ballpark range for conversions:

• Free trial: 15 - 30%
• Paid customer: 1 - 3%

--- Other costs.

As Elie said, you also have to factor in any other costs that are involved with acquiring that customer and differences based on the tactic you're using.

I'll emphasize again that all of these can vary widely based on your product, the industry, competition, quality of your ad creative, the particular advertising opportunity and a bunch of other factors. But hopefully this helps.

--- The mix.

The big challenge then is figuring out the mix. Obviously you want to put as much of your budget as possible on those tactics that have the lowest customer acquisition costs. But you have to put scale in the mix too. For example, email and newsletter ads/sponsorships might have the lowest customer acquisition costs but you might have very limited opportunities and so can't scale or reach your acquisition targets by putting all your money there. You have to incorporate other tactics.

Often testing is a critical part of this. So with some tactics you might be able to guesstimate generally what the cost of customer acquisition is but with others either you don't know or don't know the scale. So you test if possible.

Hope that helped. And again apologies if I was too basic on it.

Best of luck,

If I run an Ad Words campaign, then I can look at the conversion rate and the cost of the campaign to figure out the acquisition cost. If I have to spend time talking to the client, or actual effort in signing someone up (if the process cannot be fully automated), then I use my hourly rate as the measure.

In general, you want to keep this cost as low as possible, because there will be other things to spend money, and if you're spending too much money just getting customers, you won't be able to spend as much improving your site.

"Now when you don't know those variables you can fill in with general industry standards to guesstimate"

How do I find out what the "industry standards" are for a particular organization? I doubt I can just call up the competition and ask them what their cost of acquisition is.

-Shane