How much should you be willing to spend to acquire a customer?

Without knowing what that customer is likely to be worth, the acquisition number has very little context.

In this episode of It’s The Bottom Line that Matters, Jennifer R. Glass and Patricia Reszetylo connect customer lifetime value with customer acquisition cost and explore how the relationship between those numbers can improve marketing decisions.

The conversation looks at the difference between customers who make occasional purchases and customers who stay for years, buy repeatedly, or become particularly valuable relationships. Patricia applies the idea to restaurant marketing and the question of deliberately attracting the customers a business wants rather than simply hoping people walk through the door.

The conversation also covers:

• Why acquisition costs should be evaluated against customer value
• How purchase frequency affects lifetime value
• Why customer economics vary considerably across industries and business models
• What expenses belong in the broader customer-acquisition picture
• Why an unusually low acquisition cost may sometimes justify asking whether a business could invest more aggressively in growth

The episode gives owners a practical starting point for examining whether their marketing spend and customer economics make sense together.

Keywords/Tags:
customer acquisition cost, CAC, customer lifetime value, CLV, LTV, LTV to CAC ratio, lifetime value to CAC, marketing spend, customer acquisition, marketing ROI, customer profitability, customer value, repeat customers, customer retention, small business marketing, business finance, marketing strategy, acquisition strategy, customer economics, marketing budget, restaurant marketing, business growth, Jennifer R. Glass, Patricia Reszetylo, It’s The Bottom Line that MattersTopics covered:

• How much should I spend to acquire a customer?
• What is a good lifetime value to customer acquisition cost ratio?
• How do I compare customer lifetime value with acquisition cost?
• How do I calculate what a new customer is worth?
• Am I spending too much or too little on customer acquisition?

Three useful takeaways:

• Acquisition cost needs to be evaluated against expected customer value.
• Different customer types and business models can produce very different economics.
• Marketing spend should include the real costs involved in attracting customers, not only the most obvious ad expense.

Patricia also raises a question worth asking in any business: are you deliberately giving the customers you want a reason to choose you, or are you relying on them to wander in?

If your advertising platform says it cost $6.06 to generate a new customer, is your customer acquisition cost really $6.06?

Maybe not.

In this episode of It’s The Bottom Line that Matters, Jennifer R. Glass and Patricia Reszetylo examine customer acquisition cost and the expenses that can disappear when business owners focus only on the most visible number.

Patricia raises the example of a business looking only at advertising spend while overlooking other resources required to make the campaign work: graphic design, ad management, landing pages, website changes, and other acquisition-related work.

Jennifer adds referral fees to the discussion and emphasizes the importance of knowing what is actually being spent to bring a new customer into the business.

The conversation also explores an important distinction between three different cost categories:

• Acquiring the customer
• Delivering the product or service
• Retaining the customer after the first sale

Those numbers answer different questions and should not simply be mixed together.

Jennifer also previews upcoming conversations about customer lifetime value and the relationship between lifetime value and customer acquisition cost.

For business owners trying to decide which marketing activities are actually working, CAC becomes far more useful when the costs behind the number are clearly defined.

What you need to know:

• What is customer acquisition cost?
• How do I calculate CAC?
• What expenses should be included in customer acquisition cost?
• Is ad spend the same as CAC?
• Should referral fees count toward customer acquisition cost?
• What is the difference between acquisition cost and retention cost?

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