Optimize this one vital metric to decrease your customer acquisition cost
UNRAVELING THE COMPLEXITY OF SHARED COSTS - your customer acquisition cost (CAC) depends on it!
This week on the blog: Calculate Customer Acquisition Cost: A Startup Guide
This week we’re talking about startup metrics once again…
I wanted to provide you a quick tip for increasing the ROI of your sales and marketing efforts.
More specifically, I want to introduce to you the concept of “shared costs” and show you how those can help you decrease your customer acquisition costs (CAC).
What’s a shared cost?
Well, in the context of CAC, a “shared cost” is a customer acquisition expense that is divided among the multiple channels (or marketing initiatives) along which your customer acquisition activities are deployed.
The “shared cost” variable allows for a more accurate assessment of the individual costs attributed to each channel, which then helps you to evaluate channel effectiveness and to optimize resource allocation.
So let's say, you pay $2,000 per month for a software subscription.
It’s used by both your marketing team and your product team (making it a shared cost).
The big question - how do you factor in this shared cost when calculating your CAC?
Let's break it down…
1️⃣ Identify your shared costs. These are expenses crucial to your operations, yet not directly tied to a specific department or campaign.
2️⃣ Establish an allocation basis. How will you distribute these costs? You could base it on the department usage or the revenue they generate.
3️⃣ Distribute the costs. For instance, if your marketing and sales teams utilize the software 70% of the time, assign them 70% of the cost.
4️⃣ Roll these allocated costs into your CAC. A simple formula might look like this:
CAC = (direct costs + allocated shared costs) / number of customers acquired
Once you’ve locked down a method, maintain consistency and adjust as needed to ensure accurate trend analysis.
Truly, this isn't just about numbers! It's about understanding the TRUE cost of acquiring a new customer and how you can decrease that cost.
Ready for a deep dive into CAC? Explore the details on my blog ⬇️
This week on LinkedIn
We’re talking about growth this week, so I thought I’d share my favorite growth post from this week over on LinkedIn.
This incredible breakdown was shared by Shyvee Shi, Product Lead at LinkedIn.
This week building in public
I’ve been going pretty hard on three things this week:
Building out the content for my upcoming data strategy course for O’Reilly (it’s a 5-hour course so there’s a lot to build)
Looking for and applying to remote growth roles at AI and data companies. There’s a lot of them out there, but the market’s tough right now (especially when you work remotely from Thailand lol). With every effort I get more excited though, because
There is SO much opportunity in the AI field and
I believe that each job-seeking action is like sending out a beacon that will eventually attract the perfect role (even if that role is not one I had specifically targeted).
Getting up-to-speed on AI engineering, LLM, and GPT-4 topics (obvi. that’s a mission-critical undertaking)
In case you’re wondering why I am looking for full-time roles rather than just building up the consulting base of my own business… Here’s a GIF of just some the consulting roles I juggled in the past…
This ^^ number of different contracts with different companies is overwhelming and detracts from focus, which is why I am focused on landing one role helping just one company.
Actually, this conversation brings up a valid question in my mind. Would you be interested in learning more about the opportunities and requirements that I uncover in my search for a Growth PM role at an AI company? Please respond below…
The weekly freebie spotlight
This week’s spotlight freebie is from my partner and mentor, Dr. Nancy Li.
Free Product Masterclass
How to create a product portfolio in two weeks even if you've been laid off, or have zero PM experience
It's time to up-skill. Whether you're looking for a new PM job, you've been laid off, or you're scared you're going to lose your current job, it's time to prepare. There are limited opportunities out there, don't waste your chance.
(I’m a member of her Product Management Accelerator since 2021 and I highly recommend it to anyone who is looking to transition from an implementation role into leadership role!)
The weekly special
This week’s special deal is from the growth category.
Say hello to 96-Hour Launch Toolkit
This comprehensive product is designed to help you generate on-demand revenue while attracting new leads and customers for your startup.
With done-for-you copy and graphics templates, a step-by-step launch strategy checklist, and expert-led video trainings, you’ll have everything you need to accelerate growth by successfully deploying 96-hour launches.
Expires: EOD on 2023-08-20
Over the years, I’ve used the strategy and creative assets that I share within this toolkit to generate almost $25k in sales from just a few days of work.
I hope you love it!
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