Winning New Customers in the Restaurant and Retail Industries: Monitoring CAC

When trying to attract new customers, competition is fierce among restaurants and retailers. Today’s restaurant and retail industry sales continue to break all-time records. While this is great news for these industries, there is a trend that is causing widespread conce among restaurant and retail owners across the country – endless, fierce competition. While the consumer base continues to grow with the population, so do the number of rival businesses looking to capture their slice of that business. Much as in sports, where teams can get into bidding wars to attain top talent, retail and restaurant marketing professionals can fall into spending more on acquiring new customers than they would ideally like to spend. A big part of avoiding this scenario is ensuring you get the best return on investment for what you spend. That involves measuring and keeping a close eye on your customer acquisition costs (CAC). Defining Customer Acquisition Costs Your total CAC includes everything in your budget aimed at attracting new customers. Money targeted at retaining current customers does not apply. The simple mathematical formula for finding your CAC is straightforward. Divide your marketing costs directed at attracting new customers by the number of new customers acquired. To do this, you will need an accurate and reliable customer database to separate your current customers from new ones. Because marketing campaigns will inevitably attract both new and current customers, you need to have the ability to accurately identify your new customers to make the CAC calculation. Marketing costs also need to include details such as discounts for new customers at your POS, which should be considered part of the cost to attract them. For a simple example, consider this marketing effort: • Buying $2,000 in ads on a social media site to attract new customers • Offering a 15% discount for first purchases to new customers • Result: Attracted 50 new customers who spent $30 per purchase, or $1,500 In that scenario, your total cost would be $2,225 – the marketing cost plus the 15% discount on purchases. Your CAC would be $44.50 per new customer. Obviously, the goal should be to keep your CAC as low as possible while still bringing in a steady stream of new customers. Keeping Customer Acquisition Costs Down Having a CAC number for every marketing effort gives you a quick way to determine which methods are attracting the most customers at the lowest cost. There are a couple important things to keep in mind, however, when comparing these numbers. The first is not to execute multiple campaigns simultaneously. If you do, it will be impossible to know whether one campaign attracted the new customers, or some combination of them all. Run one campaign at a time, then bring it to a close and calculate the CAC before proceeding to the next campaign or continuing with a variation of the current one. It’s also important to make sure and try the least expensive marketing campaigns. Unless you have a large budget, it might be smarter to start small and ease your way into the more expensive methods. The results from free or relatively inexpensive ways of marketing can work very well for some businesses. For example, a social media campaign, content marketing efforts or managing your reputation on free online review sites could result in a very low CAC. Calculating your CAC offers you a straightforward way to find out which marketing approach works best for your business. In such a competitive environment, ROI on marketing dollars spent must be continuously optimized and monitored very closely. Measuring CAC offers a great baseline metric on overall spend, and on which to base other marketing efforts.