For every new customer you gain, there is a cost to acquire them. This cost may come through the marketing of your product or the time of your sales team. When forecasting budgets, it is important to include the cost of customer acquisition into your predicted profit and loss. If it costs you more to acquire a customer than it does for them to buy your product then something is going wrong!
For example…
Let’s say you review your data and you realise your customer database has grown by 5,000 this year. But how much did you spend on marketing? If you had a $20,000 budget for marketing and associated staff and ended up with 5,000 new customers, the acquisition cost is around $4 per customer. If each customer only spends an average of $4 with you, your efforts have been wasted as there will be no profits.
