Advertising costs for attracting new customers.

Started by inaevrodom, Jul 06, 2022, 10:10 PM

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inaevrodomTopic starter

Question for hosting providers:
I would like to know your opinion about the advertising cost, how much and how many customers get.
What type of advertising is most profitable (contextual, Seo, banner, ordering articles, etc.). It is also interesting how much is spent on hosting promotion and maintaining the "advertising level".
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I would say: all advertising is useful in moderation... (except spam, although if the company doesn't care what they say about it...)

I will highlight these points:
website optimization for search engines
contextual advertising  (Google AW, etc.)
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In general, a lot depends on what kind of resource you are promoting. In addition to the methods mentioned above (optimization for search engines), various articles aimed at the target user, as well as social networks, have proven themselves very well. For articles, publications, it is better to hire qualified copywriters, and it is also good to have a network of partner resources where you can post publications with a link to your resource. ::)


What can CAC (Customer Acquisition Cost) be for your business?
Comparison with another metric helps to evaluate CAC — lifetime value (LTV, or lifetime value of the client). That is a forecast of how much gross profit the customer will bring during his life as a buyer.

What is LTV and how to calculate it:
By the ratio of CAC and LTV, you can understand whether the business is paying too much for attracting customers.
In theory, it is assumed that CAC should not be higher than LTV. If the CAC is greater than LTV, the business does not reach payback. That is written by Paul Ferris and co-authors in the book Marketing Metrics: The Definitive Guide to Measuring Marketing Performance.
The book Marketing Metrics: The Definitive Guide to Measuring Marketing Performance

In practice, everything is somewhat more complicated — there is no optimal value. The ratio of CAC to LTV should be assessed based on administrative costs and business specifics.
The more administrative expenses a company has, the lower the CAC should be in relation to LTV in order for the company to come out in a plus. The specifics of the business are marginality, the number of repeat sales and the sales cycle.
For instance, for an IT service startup without employees, it is enough if the CAC is slightly less than LTV. That is, the cost of attracting a client will pay off and there will be a small profit, because there are no other costs.

And for a real estate agency with a marketer, analyst and content manager on staff, the difference between LTV and CAC should cover indirect costs - for instance, for employees, office rent, CRM and site support.