These are all the costs the business spends on marketing and business activities, including the money spent on marketing and promotion, identifying target markets, acquiring potential customers (suspects, prospects, leads) and business and contract costs.
Why is it important to know the cost of getting one lead? And how to determine it?
The aim of marketing and business activities is to get as many customers as possible. This means turning prospective customers, i.e. those who are interested in our product or service but have not yet made a purchasing decision, into customers. The cost of getting one lead must be paid off to the company by means of purchases of the actual customer, this means that we have to know how much this one customer is going to spend on our products or services. Therefore, we need to know how much profit we have from one customer - from purchased product (if the customer makes a one-time purchase) or from some period of time (if the customer purchases products or services on a regular basis) or throughout the business relationship with the customer (Lifetime Value (LTV)). Another indicator we need to know is the conversion rate (conversion of potential customers to actual customers): how many percent of the total number of leads will really become customers.
No matter the quality of your product, it your lead acquisition costs and costs spent on conversion into an actual customer exceed the amount that the customer will bring to the company, then, the business will be at a loss in the long term. The more your customer brings to you, the more you can spend on getting one lead. Therefore, each company must choose an appropriate way of getting new leads so that the costs are balanced by the future revenues.
How do I calculate LAC?
LAC = MC / LA
- MC is the total of marketing costs
- LA is the number of leads acquired