In the restaurant business, as in any other, every action taken to win new customers has a cost. So far, nothing new, but do you know how to calculate it, and how useful it really is? In the form of a simple formula, the cost of customer acquisition will help you make the best decisions for the management of your restaurant.
Innovorder takes you on a journey to conquer new customers, yes, but in a reasoned and strategic way, thanks to CAC!
Defining customer acquisition cost (CAC)
Customer acquisition cost, also known as CAC in marketing jargon, refers to the average amount spent by a company - a restaurant in your case - to acquire a new customer.
For this performance indicator to be as accurate as possible, it is essential to take into account all the resources allocated to transforming a prospect into a real customer. By resources, we mean all expenditure on marketing campaigns, advertising, sales strategies and so on.
👉 Further information: Key performance indicators for the foodservice industry
The importance of CAC
The customer acquisition cost (CAC) will enable you to measure the return on investment (ROI) of the efforts invested in winning new customers. CAC is an important indicator for your restaurant, enabling you to determine the effectiveness of your marketing and sales strategies.
A low CAC means that your campaigns are profitable and effective. If, on the other hand, your CAC is high, it means that you should review the channels you use, as well as your marketing and sales strategies, because their impact is too low.
Once you know how much it costs to acquire a new customer, you can make comparisons and determine which types of action are most profitable, with the aim of increasing your ROI and, ultimately, your sales.
One comparison might be to write a sales e-mail with the aim of converting prospects into customers, and then carry out A/B tests. One part of your target audience receives an e-mail with certain information, another group receives an e-mail with other information. You'll then be able to see which factors work best and take them into account for future campaigns.
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Customer acquisition cost formula
There's a simple formula for calculating the cost of customer acquisition.
CAC = (Marketing Department + Sales Department)/Number of customers acquired, over the same time interval (month, quarter, season, year, etc.).
Let's illustrate this calculation with a concrete example. This month, you invested 1,000 euros in marketing and sales. You have acquired 100 new customers. How much do you estimate your CAC to be? 1,000/100 = 10. Your CAC will be 10 euros.
👉 To find out more: How to attract customers to your restaurant?
Expenses to be taken into account
The formula for calculating the cost of customer acquisition includes numerous marketing and sales expenses
- Digital marketing costs
- emailing campaigns,
- SEO optimization of your site and content,
- publications on social networks,
- SEA, paid online advertising,
- marketing and CRM software licenses,
- pay-per-click advertising,
- etc.
- Traditional marketing costs
- participation in trade shows,
- public relations,
- salaries and bonuses for marketing teams,
- advertising in press, radio, TV, etc,
- displays,
- etc.
- Expenses associated with sales campaigns
- telephone prospecting,
- sales team salaries and bonuses,
- mileage of business vehicles,
- etc.
- Any additional costs, such as the cost of hiring consultants, designers, SEO experts, etc.
The more accurately you list your expenses, the more reliable your CAC will be.
A customer's lifetime value
We can't talk about customer acquisition costs without mentioning customer lifetime value (CLV). This figure expresses all the benefits generated by a customer throughout his or her commercial relationship with your company.
Why is it linked to CAC? It's often said that a marketing or sales action is profitable if a customer's VVC offsets the CAC. In other words, for a campaign to be profitable, the benefits generated by a customer must exceed the cost of acquisition. When the CAC exceeds the CLC, the customer is bringing in less than he's costing you. This is the signal that you need to review your customer acquisition strategy.
As you can see, the CAC calculation is particularly interesting when analyzed in conjunction with a range of other data , such as customer lifetime, average amount spent per visit, customer retention rate, profit margin per customer, average gross margin per customer, etc. All these data can add nuance to your CAC. All these data can help you make the most of your CAC.
The cost of acquiring a customer who spends a coffee in your restaurant is obviously not the same as the cost of winning over a customer who comes to your establishment for lunch every week. A CAC of 10 euros will seem too high for the first customer, whereas for the second it will seem derisory.
Strategies for optimizing your CAC
As you can see, the lower your CAC and the longer your customers' lifetime value, the better. So let's take a look at how to make your investments as profitable as possible.
There are several ways to combat high CAC:
- Make sure you set the right prices. No matter how effective your marketing and sales efforts, if prices are too high, customers will show little interest in your establishment.
- Prioritize the most profitable channels by studying them all separately to find out the cost of each and which one brings you the most qualified customers.
- Set yourself budget limits, a certain amount not to be exceeded when it comes to acquiring new customers.
- Adopt inbound marketing techniques. These methods are less costly than outbound marketing and often more effective. This means you can reduce your customer acquisition costs.
2 strategies stand out in the fight against low life values:
- improve your customer service and strengthen your relationship with your customers,
- set up an effective loyalty system(subscription, loyalty card, sponsorship, promotions, etc.).
👉 To go further: customer loyalty: 6 ideas for your restaurant
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Did you like these tips? Don't hesitate to consult our other articles on our blog to help you develop your business!
Innovorder is the leader in digital solutions for commercial and institutional foodservice. Our team supports restaurateurs in their digital transformation with a complete ecosystem.
