How To Reduce CAC For SaaS?
[Using Customer Journey Optimization ]
What is Customer Acquisition Cost and why it is important for SaaS?
The customer acquisition cost (CAC) is a major startup cost. It is the total amount spent by a business in order to acquire a new customer. CAC includes both direct and indirect marketing expenses and advertising costs (e.g. Facebook ads). For SaaS companies, it is important to reduce their CAC because their business model depends on a continuous subscription revenue from existing customers.
CAC = (Cost of Sales + Cost of Marketing)/ New Customers Acquired
Table of Contents
How To Calculate Your CAC?
In order for you to calculate your company’s CAC, you will need three things:
- Add all your sales-related expenses for the past 12 months
- Add all your marketing-related expenses for the past 12 months
- Add all your new customers who signed up during this period
Key Metrics That Impact CAC
The most important things to track are the average customer lifetime value (LTV) and average customer acquisition cost. These two metrics will give you an idea of whether or not your company is making money, and if you’re losing money, where it’s going wrong.
- Average lifetime value (LTV): The total amount of revenue a single user brings in over their lifetime with your service
- Average acquisition cost (CAC): The amount spent on acquiring each new customer
Major Pain Points In a Customer Journey
There are three major pain points in a customer journey: The first is the decision stage when a user decides whether or not to begin using your service. This is where you need to make sure that you’re building something people want, and that it solves their problems in an effective way.
The second is the onboarding process: how do new users get up and running with your product? This is one of the most important stages in any customer journey because if users don’t understand how to use your product from the beginning, they’ll never come back again!
Finally, there’s the retention phase: how well do you retain customers over time? This is where you’ll see the most return on your investment because it’s much cheaper to keep a customer than it is to acquire one.
How To Optimize Your Customer Journey?
It’s important to define the problem before starting on a solution. With that said, you need to set goals (not just any goals) and be ambitious but stay realistic.
Your customer journey should include things like: what are the biggest barriers for people being able to use your product? Where are they dropping off? What can you do about it?
You can reduce your CAC by optimizing your customer journey through better messaging, marketing automation, and advertising
1 – Improve Messaging: There are many ways to improve the messaging in your digital ads. The first step is to make sure that your landing page meets customer expectations based on the ad they clicked. If it doesn’t, then you can retarget those customers with ads that take them back to a page that does meet their needs.
2 – Improve Marketing Automation: This is the process of automating your marketing activities. This can include email, social media, and display advertising. By using marketing automation tools such as HubSpot, you can create custom audiences based on customer data to improve the performance of your digital ads.
3 – Improve Advertising: The best way to improve the performance of your digital ads is by improving their content. This means creating ads with a clear call-to-action and using dynamic creative that adapts to customer behavior.
Let's Put This Into Practice!
Remember that this is an ongoing process and not something that should be done once and then forgotten. As your company grows, so will its needs—and so will those of its customers. By keeping on top of these changing requirements, you’ll ensure that your company stays ahead of the competition by providing them with what they need when they need it most.
To help you get started right away with optimizing your customer journey, here are some extra and juicy key tips:
- Measure CAC regularly to ensure it’s decreasing over time (and make sure this decrease isn’t due to a decrease in quality).
- Understand what makes customers want to buy from a particular brand or competitor—and use this information to inform how you refine your product offering and approach growth strategies from both quantitative and qualitative perspectives (e.g., surveys).
Conclusion
The above-mentioned tips can be used to optimize your customer journey and reduce the CAC. If you’re looking for more ways to reduce your CAC, then we have a few additional suggestions. First of all, you should focus on optimizing the right metrics instead of just focusing on top-line growth. You can do this by using tools like Salesforce that track key metrics such as user engagement (time spent with the product) or average revenue per user (ARPU). Secondly, make sure that you’re always testing out new ideas and improving upon existing ones. The last thing would be setting up marketing automation which allows you to get in contact with potential leads who are more likely interested in your product/service than others.
To help you get started right away with optimizing your customer journey, here are some extra and juicy key tips:
- Measure CAC regularly to ensure it’s decreasing over time (and make sure this decrease isn’t due to a decrease in quality).
- Understand what makes customers want to buy from a particular brand or competitor—and use this information to inform how you refine your product offering and approach growth strategies from both quantitative and qualitative perspectives (e.g., surveys).
Delighted customers are happy customers. If you can make your customers happy, they will keep coming back to you and tell their friends about what a great experience they had with your company. This is why delighting customers is so important—it’s the best way to build loyalty and create long-term relationships that lead to repeat business.
