Customer Acquisition Cost for Organic Website Traffic?
Discussion
Background :- identifying KPIs to help scale an established online business.
I'm having a debate with a business adviser around calculating CAC (Customer Acquisition Cost) for an online business where customers are converted from organic traffic. There is no explicit sales and marketing activity, and no PPC or other advertising, beyond creating content to attract visitors to the website.
The standard CAC calculation is simply (Marketing + Sales Expenses) / Number of new Customers.
His view is that "Marketing and Sales" does not include the cost of servers/hosting but should include the fees paid to content writers.
My gut feel is that the hosting costs are significant, and essential for the performance of the websites - thereby helping organic search presence and improve user experience, so should be included.
Most online references I can see tend to agree with his view, but I have found mention of a "fully loaded CAC" which would include ALL costs associated with acquisition.
The CAC will be very low if it only includes content production, which will obviously look good...
but what say you?
I suppose we could simply track both, and be explicit about what's included in each calculation.
Thoughts gratefully received! TIA!
I'm having a debate with a business adviser around calculating CAC (Customer Acquisition Cost) for an online business where customers are converted from organic traffic. There is no explicit sales and marketing activity, and no PPC or other advertising, beyond creating content to attract visitors to the website.
The standard CAC calculation is simply (Marketing + Sales Expenses) / Number of new Customers.
His view is that "Marketing and Sales" does not include the cost of servers/hosting but should include the fees paid to content writers.
My gut feel is that the hosting costs are significant, and essential for the performance of the websites - thereby helping organic search presence and improve user experience, so should be included.
Most online references I can see tend to agree with his view, but I have found mention of a "fully loaded CAC" which would include ALL costs associated with acquisition.
The CAC will be very low if it only includes content production, which will obviously look good...
but what say you? I suppose we could simply track both, and be explicit about what's included in each calculation.
Thoughts gratefully received! TIA!
I don't think you can attribute server and hosting costs purely to organic traffic, because the costs are there for any visitor whether they arrived organically or through paid advertising, affiliates or any other method.
Organic traffic cost per acquisition can indeed be low - it's why it's for most businesses the best long term strategy for bringing in new customers. What you can do is break out SEO costs, so that organic SEO traffic for terms you have targeted are attributed to those sales versus sales where people have arrived via typing in your brand name/trademark which you'd expect to arrive on your site whether you had people doing SEO and writing content or not.
Organic traffic cost per acquisition can indeed be low - it's why it's for most businesses the best long term strategy for bringing in new customers. What you can do is break out SEO costs, so that organic SEO traffic for terms you have targeted are attributed to those sales versus sales where people have arrived via typing in your brand name/trademark which you'd expect to arrive on your site whether you had people doing SEO and writing content or not.
If I were thinking about it from a cost of sales perspective (presume acquisition cost would fall into that), suppose a true representation would be the additonal costs you incur in hosting/software/hardware, over and above that you would have spent just to host a typical website not optimised for large-scale transactional performance.
It's possibly dancing on the head of a pin, though.
It's possibly dancing on the head of a pin, though.
You would only include hosting, domain etc… if you were looking at CAC of the website as a whole (imo), though I would expect some weighting to be applied for organic growth if there was no SEO (if the data is available). E.g. Typically new customers have grown at 5%/period, with SEO it’s 10%/period
Dave2P said:
His view is that "Marketing and Sales" does not include the cost of servers/hosting but should include the fees paid to content writers.
I'd also agree with this view.Everything else that is not directly attributable to the acquisition of customers is a business overhead which is used to calculate the profitability of the customers acquired over time.
This is on the assumption that the nature of business is more that a one-time-purchase offer to those customers.
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