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My partners and I are building a site which provides a unique way for merchants to acquire new customers.

To guide the development of our initial pricing strategy, we are looking for some benchmarks for typical customer acquisition costs for various retail segments like tire shops, auto-repair shops, widget retailers, etc.

Thanks in advance to all for your wisdom and advice.

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3 Answers

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Sounds like you need to talk to your potential customers!

You should be able to ask some tire shops and auto repair shop owners.

If they won't talk to you, it will be hard to sell them later. Anyway you'll want a handful of initial customers who are willing to entertain new ideas and try them out.

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Oh that! We are indeed using the Customer Development approach, which means getting out there to brainstorm with real prospects to iterate on our product ideas. I have to admit that getting out of the "let's ruminate about the business model theory" mode we all grew up with is harder than it should be. We were trying to be "intelligent" before getting out there, but sometime it is probably better to just ask the questions. That's a long way of saying "Point well-taken." Thanks Jason. – Startup Guy Feb 27 '10 at 1:37
UPDATE: We had a great visit with a prospect, who--because he spends "funny money" from co-op ad dollars, doesn't really care about his customer acquisition costs. He did, however, tell us how much he VALUES getting a new customer, which is what we really wanted to know anyway. Details on my blog (UpYourROI.com) – Startup Guy Mar 15 '10 at 11:49
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I think you're going to have a problem locating exact information on these costs.

Here is an article that talks about defining cac and the ltv (lifetime value - i.e. the ability to monetize those customer).

They have a good cac example showing adwords - perhaps this would be a good framework to consider.

They make a good point on how much the human touch adds to the equation: they posit it varies from $400 to $5000, depending on the approach used.

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Thanks Jim; this is great information about calculating OUR customer acquisition costs (and this is obviously important to the bottom-line portion of our pricing strategy), but we are looking for data about CAC's for the merchants. For example, if Joe's Tires spends $10 in marketing for each new customer, we have some idea of where our (top-line) price to Joe's Tires needs to be. – Startup Guy Feb 26 '10 at 5:49
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CPA varies greatly even within industries - you have the young upstarts and the bigger guys whose marketing budget are totally different. So knowing the average probably won't help much.

It would help if you have an ideal customer in mind. Talk to your ideal customer, and gather feedback on what kind of channels he would use to market his product, and break down the costs based on these channels from there. That would be a good start.

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