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Customer Acquisition Cost: How to track it and calculate it - YouTube
Channel: Slidebean
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this video was brought to you by
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slidebean founders edition
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get help from our team in your pitch
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take your financial models and
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your fundraising sign up with the link
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in the description
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the backbone of slidbeans growth has
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been diligently and accurately
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tracking our customer acquisition costs
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our marketing strategy consists
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of cycles that go like this spend some
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money testing a marketing channel
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usually between five hundred dollars and
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a thousand dollars for a final test
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measure how many acquisitions we get
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from that channel and if the numbers
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make sense
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double the budget repeat until the
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numbers no longer work
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every single marketing campaign we do
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and we continue to do
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is based on this premise including these
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youtube videos
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our first successful marketing channel
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was google search ads we doubled the
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budget until the cost of acquisition no
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longer made sense to us
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then we did seo and finally youtube with
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this channel we are still in the process
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of doubling down our budget every month
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and the numbers still make sense for us
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we went from a budget of around a
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thousand dollars
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to around ten thousand dollars per month
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that we spent in video production
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and that continues to make sense because
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we know we are generating more than
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five times that every month now it's
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really easy to track
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where a customer came from when you're
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using digital channels
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some channels however are much harder to
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measure so in this video
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we'll go over the tactics that we've
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used to track conversions over the years
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and a few hacks that might be useful for
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harder to track conversions
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[Music]
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digital channels let's start with the
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easy stuff
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you can try conversions from digital
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using google analytics the platform is
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free and as long as it is set up
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correctly
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it'll track all the data that you need
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you can install google analytics by
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placing a short line of code on every
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page on your website
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as soon as you do you'll start seeing
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every single website visit
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tracked on the platform now i don't have
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time to go into every single google
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analytics feature
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and to be honest the platform is so
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powerful i probably don't know half of
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what it can do but here are some crucial
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details related specifically
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to tracking customer acquisition and
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conversions
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the quintessential feature in google
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analytics is called
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goals you can find that under admin
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goals a goal is quite literally a
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conversion you can define that
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conversion when the user reaches a
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specific page
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for example a success page on your
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website a goal
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may also be visiting a specific number
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of pages
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staying on the site for a given amount
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of time or events
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analytics also has a complete conversion
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tracking system for an e-commerce
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website which squarespace
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shopify and webflow all support now
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you're probably going to be tracking
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your main conversion event
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using success pages or events i'm going
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to dig into those too
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with a success page all you need to do
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is add the url
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and google analytics will automatically
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log a conversion whenever somebody
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visits that url events are a bit more
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advanced you'll need to send
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event information to google analytics
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using javascript
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all events will be logged under the user
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behavior section
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every single event that you send then
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you can define a specific event that you
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would define that you would consider a
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conversion
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this should be no trouble for your dev
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team now once you have goals installed
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in google analytics
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there are tons of different types of
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information that you can gather
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for example you can go to the landing
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pages section to find out which pages
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drive the most gold conversions the
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conversion rate will also be tracked and
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calculated automatically you can also
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see for example which
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channels are driving the most gold
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conversions channels and google
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analytics are broad
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traffic categories such as organic which
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is searches
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direct which is when somebody types the
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exact url in the browser
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social media referrals from other
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websites display ads emails and so on
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another great feature is
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tracking funnels if there are various
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steps needed to complete a goal google
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analytics will let you add those steps
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to the settings of the goal conversion
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which will provide you with a
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funnel view that lets you see the drop
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of rate in different places
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of the process we use these goals a lot
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not only to track conversions into our
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platform plans
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but sign ups downloads on our templates
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and customers using specific features
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inside our presentation builder any
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success event on your website should be
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a goal
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and you should continuously keep an eye
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on them especially when you launch new
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features
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also having your goals set up correctly
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will allow you to run
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free a b tests on your pages using a
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platform called google optimize
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again optimize is free another tool by
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google that lets you change the wording
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the colors the images and even create
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entirely new pages
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and split traffic between them google
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optimized and reports which of the two
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pages drove the most gold conversions
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and automatically selects a winner once
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there's enough data to be
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absolutely sure which page was the best
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one we try our best to have a b tests
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running
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on most of our main landing pages pretty
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much all the time
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google also lets you track conversions
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on google ads you can even optimize your
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google ads towards a specific
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cost of acquisition for example you can
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tell google ads that you're willing to
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pay 250 bucks for a conversion
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and google will balance the bids and the
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ad placement to stay within that goal
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now goals may not work for everything
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for example in our case customers often
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sign up to our presentation builder from
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a channel but the activation to a plan
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happens
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a couple of days later after they had a
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chance to try and
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honestly to fall in love with our
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platform so the first visit to our
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website may be a
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referral from youtube but the second
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visit may be direct traffic
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so who gets the credit google analytics
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has a feature called user id
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which actually haven't had a chance to
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play with but we're in the process of
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implementing ourselves
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i'll tell you all about that later but
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so far we've done it with different
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tools such as kismetrics and intercom
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another fantastic way to track customer
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sources is by just
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asking your users whenever you upgrade
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your swiping account
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we will ask the question where did you
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hear about us if you give them a simple
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menu with straightforward options
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you can collect incredibly valuable data
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here for example
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so many customers in the past few months
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are coming to us after watching a
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youtube video
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many of them just search for slide paint
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and google which means would generally
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be attributing that conversion to search
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when it was really
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a conversion that came from youtube the
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only way to know is by asking
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and don't be afraid to ask while extra
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steps in funnels are often detractors
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for
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customers and conversions we are making
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sure that we ask this question
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only after the conversion already
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happened another way to track
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conversions accurately is using utm
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tags google now calls this the campaign
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url builder
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it's a simple form provided by google
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that attaches parameters to the url
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which google analytics can read for
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example if you're putting a link on a
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medium post you can define a custom url
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to know
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which post which specific publication is
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bringing the traffic and the conversions
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you can get as specific as having
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different urls for different call to
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actions within the same article
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that's usually an overkill in my
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experience now let's talk about
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estimating
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cac or the cost of acquisition the most
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basic formula for cost of acquisition is
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dividing your marketing spend
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by the number of acquired customers now
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doing this math for a paid advertising
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campaign
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or for a sponsorship is pretty easy just
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take the total spend
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and divide it by the number of customers
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as long as you're pretty sure about
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that number of customers and that
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attribution you should be fine however
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this gets harder when a campaign
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involves the team's time for example and
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not
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ads specifically in that case you can
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estimate your company cost per hour
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for each one of the team members
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involved and then divided by the number
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of required customers
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now i also like to track what i call a
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general cost of acquisition
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number for that i take into account the
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cost of the marketing
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and the sales team and their operational
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cost
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operational cost is the sum of our rent
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our hr team
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or office expenses and even a fraction
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of my own salary
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the salary that's dedicated or the time
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that's dedicated to managing the team
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i divide the total costs by the number
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of team members which gives me the
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average
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overhead cost of an employee in the
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company in our case
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that number is around 700 per employee
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then the real cost of acquisition is the
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sum
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of growth team salaries that overhead
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cost i just talked about
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the cost of the ads and any other
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expenses by the marketing team
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and then we take all that and divide it
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by the number of customers acquired
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again this number is not going to be
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useful for tracking the success of one
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campaign versus the other
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but it's a fantastic indication of the
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progress of the business
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using cost of acquisition for
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projections historical performance is
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just the beginning if you track these
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cost of acquisition costs correctly
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you can use them to estimate future
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performance in your financial modeling
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our thesis for marketing is again
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running tests
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finding out which tests are successful
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and then repeating what we do for future
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projections is take the effective
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marketing budget
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and project it towards the future
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experiments are not part of that budget
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that's important
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so we try to keep them apart so as not
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to skew the data
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for example you can take the six month
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average of marketing spend
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and the six month average of the cost of
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acquisition and project
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towards the future let's look at this
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pattern for example this company has
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been increasing its total marketing
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budget by around
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fifteen hundred dollars every month with
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spikes here and there
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still there's an overall trending
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increase in the cost of acquisition as
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the marketing budget
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increases that's pretty much expected
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the cost of acquiring customers
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gets higher the more money you spend now
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we can use this trend as a variable
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to project towards the future we can
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guess that if the marketing budget
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continues to increase at the same rate
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the cost of acquisition will continue to
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do so as well and thus we can estimate
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the number of new customers
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that we'll be getting again this is a
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guess a projection
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but it's based on real data that's as
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good as it gets
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one big mistake i often see is companies
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modeling their future growth
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simply based on a random number of
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customers they expect to get every month
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or towards the end of the year to me the
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best way to model
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future growth is by estimating both the
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scale in your marketing budget
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your cost of acquisition and using that
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division
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to estimate the number of customers you
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effectively
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plan to bring in that way you know that
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if you expect to bring
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10 000 new customers in your third year
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you'll need to spend
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say 500 000 in marketing unless you come
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up with a magic formula to decrease your
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acquisition cost you can also look at
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your projections in the future and
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estimate if the numbers are feasible
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and if the cost of bringing those
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customers in is realistic now the sheet
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that i used for all these examples is
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our financial model template by the way
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we have spreadsheets built out for a
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bunch of different business models
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e-commerce
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subscriptions social media platforms and
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they're all available for purchase on
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our website but they're also included
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with our founders edition plan
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the founder's addition plan includes
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downloads of every single one of our
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templates
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more than that we designed it as a
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handholding plan to assist you in the
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process of building your pitch deck
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and getting to investors you can book
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calls with our writing team submit your
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slides for our design team to review
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them
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you can even book a call with me to go
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over your fundraising plans or your
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growth strategies that's all included in
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the plan
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you can find more info about the
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founders edition plan in the link that
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we've left in the description you'll
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notice that it is a utm
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tagged link which will let us track the
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actual effectiveness
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of this video's conversions so if you
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found this video useful
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make sure to subscribe and we'll see you
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next week
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[Music]
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