Customer Acquisition & Monetization

Presentation describing how Cost of Customer Acquisition (CAC) and Monetization (LTV) are they key elements to get right for a successful business model. Also describes the latest techniques for reducing CAC, including Inbound Marketing, and the author’s own methodology: Building a Sales & Marketing Machine.

This presentation was given to the tech community in Atlanta on Feb 11th, 2009. It summarizes in a single presentation several of the key themes on this web site.

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  • http://www.fablogue.com/ Rana Mumtaz

    Could you share some stats on the going CAC rates for a B2C retail business. I read on Shop.org that it was on an average $14 per customer. Sounds low for a start-up online business.

    I appreciate your help

  • http://www.forentrepreneurs.com David Skok

    Rana, I would love to help you, but it turns out these are all over the map due to different conversion rates. If there are any other readers that have views on this, please help by adding your replies.

  • http://www.forentrepreneurs.com David Skok

    Rana, this is deeply dependent on conversion rates for traffic, and types of sources used to generate traffic. However if you figure 50-75 cents for PPC, which could be higher or lower depending on the specific keywords, and then take a guess at conversion percentages, you can easily compute the number. For $14 per customer, this would imply a conversion rate of 3.5% to 5% which sounds reasonable. This number almost certainly does not include any people costs.

    Best, David

  • http://www.FABLOGUE.com Rana Mumtaz

    Thanks David,
    Although a little late. I am actually live now and learning through practice. CTR's are much lower than my expectations. I am actually spending time on SEO right now and adding more designers/content.

  • http://www.FABLOGUE.com Rana Mumtaz

    Thanks David,
    Although a little late. I am actually live now and learning through practice. CTR's are much lower than my expectations. I am actually spending time on SEO right now and adding more designers/content.

  • Gabe

    Great article and presentation!  I have just one thing that I am unsure of in your CAC calculation for a web driven business model.  How do you calculate cost per employee per month?  What is included in the cost?    
    In the CAC for a Direct Salesforce how do you get Total Team Cost? 
     

  • http://www.forentrepreneurs.com David Skok

    Hi Gabe, to compute cost per employee per month, simply take all expenses for an average month, and divide by the number of employees that you have. This should include expenses like salaries, rent, legal, travel, etc.

    To get total team cost, add the salaries and social costs (typically about 20% of the salaries in the US), and then add other expenses such as travel, rent if they are in an out of town office, etc.

    I hope this helps!

  • http://www.freshwebmedia.com.au/ web design perth

    Very helpful suggestion on this post! It’s the little adjustments that make the most dramatic changes. Thanks a lot for sharing!

  • Entrepreneur

    Thanks for writing this. What if there is already an entrant in the market that is taking a new approach with a new business model? Would it be an attractive opportunity to use the same business model but with a better product? I see an opportunity with a few entrants, but I see what seems to be a better way to execute.

  • http://www.forentrepreneurs.com David Skok

    The best way to find this out is to go an ask customers, and get them to look at both products and ask them to be very truthful to you with their answers. Typically if the existing player has an entrenched position and a strong brand, you will need a product that is 10x better to disrupt them. But if they are a startup with little brand recognition, then something less than that. But I would advise checking with customers to see what they think. Ultimately it will come down to whether they will buy or not.
    Best, David