Customer acquisition cost refers to the cost of convincing new customers towards your product or service.
For web hosting startup, this cost is borne incurred by the web-hosting company itself to convince the potential customers.
The cost includes product cost along with a cost of accessibility, marketing, and research. This is a significant metric of web-hosting startup. It helps to know the customer value and ROI of the acquisition.
This helps the company to know how much of the resources are to be spent profitably on a customer. In simple words, it can be said that it helps to know the customer’s worth to the company.
Customer acquisition cost increases typically with the maturity of business. Also, the return on acquisition cost diminishes with growth in the size of the business and its geographical distribution.
Operating websites often cost the companies significantly, yet their performance is not measured as such. The website gives you an excellent way of acquiring your customers cost-effectively and measurably.
For this, it is essential to know who much will each customer’s cost via the website. Once this figure is known to you, then see if these new customers will be profitable to you or not.
If you want to know whether the website is positively contributing towards the bottom line of the company, it is recommended that you should use customer acquisition as an indicator of the website’s performance.
This is the reason why Hostgator is my 1st choice over Godaddy hosting. Hostgator customer acquisition team has so many open programs and connections to stay in touch with potential customers.
At right moment which customer is in the last stage of buying cycle, they send them their best web hosting plan at discounted rates and acquire the customer.
To know the cost of acquisition of your website, you need to consider the following things:
New customers each month:
new customers refer to those who have purchased services directly from your website or have become a qualified sales personnel with the help of your website or have visited your website for buying services and products for their physical outlets.
Cost of website development:
it refers to the total cost of developing a website along with the modifications made since the website has developed.
Website expected life:
It refers to the time for which the website is supposed to be useful for the company. The figure is usually expressed in months.
Cost of monthly promotions:
it refers to all online as well as offline website promotion and advertisement costs.
Cost of monthly maintenance:
what the company is spending on maintenance and running of the website includes the cost of staff appointed to maintain the website and handle inquiries, bandwidth, ISP fees, Hosting costs and some other fixed costs as well.
For making your business profitable on every new customer, start-ups need to balance the following two variables:
- Cost of acquiring the customers (CAC)
- Lifetime value of the customers (LTV)
CAC can be calculated by considering the entire cost of the website as mentioned above in the article and LTV can be calculated by taking the average revenue generated from each user over the relational lifetime of the business with the respective customer.
Studies have proved that a right business model is one in which the cost of acquisition from the customers is less than his expected lifetime value.