Customer acquisition cost · Kickstarter

Any good resources for customer acquisition costs of comparable services?

Jonathan Heyne Co-founder & CEO at Mentive

April 15th, 2015

We're building an online educational marketplace, and are having hard time understanding what our CAC is going to look like. We ran a pilot course with CAC of absolutely zero, through an affiliate who sent mass emails that resulted in paying users. This is obviously not sustainable at scale. We are going to run experiments with adwords etc, but I was wondering if there are any online resources with info re CAC of existing companies out there. Obviously, companies are not happy to share this data, but maybe market analysis reports or bloggers who estimated those? I saw several discussions here about how to estimate CAC, but not about how to find data about comparable companies. I'm especially interested in online courses platforms (Coursera, edX, Udemy, Lynda, ...), marketplaces (Uber or AirBnb in their early days...), and platforms like kickstarter or indiegogo. Thanks!

Mana Ionescu President, Lightspan Digital: Digital Marketing Problem-Solver and Speaker

April 15th, 2015

"CAC of absolutely zero" is impossible. And I'm assuming you're talking about "customer acquisition cost," not the military CAC. So let's be honest here... But if it's true, then keep looking for more affiliates. At some point you'll need to expand into other channels and follow Brian's advice. In the online ed space we've seen CPA (cost per acquisition) range between $60 and $800 (at MBA program level). The lower cost leads come from affiliate sources but they also turn out to be the worst customers (retention is very low and customer lifetime value is lowest of all channels). So you'll just have to run tests via different channels and markets and make projections based on your test numbers and then watch to see which lead source is most profitable in the long term.

Karl Schulmeisters Founder ExStreamVR

April 15th, 2015

I don't think Adwords will give you an accurate view of your CaC since AdWords have very different effects during intial deployment vs 6 mos in.  

Mana's point about impossibility of having CaC at zero unless all your OpEx and CapEx depreciation costs are zero (which is why Mr. Palmer's "free"  advice is off the track) since you are spending SOMETHING to at least create the collateral.

Paul O'Brien

April 15th, 2015

Frankly, get going with your adwords test.  There is no other dataset nor platform so comprehensively used that it's performance approximates a real market.  With search data (volume, trends, CPCs, and your performance) you can extrapolate everything else from the size of the market and cost to acquire therein, to the relative CAC from other channels.  

By that token, it's also the only way to get a valid sample of what comparable companies' CAC might be.  Why?  Keep in mind the unique context of search marketing - it is an intent based audience.  That means, it's the only channel through which you can draw some valid assumptions that YOUR performance from a sales based ad on a specific keyword pointing to a similar landing page approximating that of what your comparables experience.    To do the same on Facebook, email, or other channels removes the context of intent and creates any other number of use cases that result in THEIR experience advertising there differing from your experience (i.e. targeting, audience, cpc, etc.).  

It's not easy to do as you further need to draw some assumptions about brand strength, existing awareness (or lack thereof), and accessibility on various platforms (you could run the exact same ad, landing page, and have equivalent brand strength as a comparable but if they are on iOS and Android and you're only on Android...).

Stephen Palmer Grand Master, Sovereign White Knights - 6 Peaceful Orders

April 16th, 2015

I believe Karl missed the primary point, its not ads, it is new customer aquisition, iif it was not about expensive systems, they would not keep pushing it their way. The higher level above the adwords is not off-point, it is the higher position on the algorithm. What you want and need is less cost for acquisition per customer, but if you are stuck on a single principal further down the rabbit hole, then stay with Karl, he will lead you to the 300 to 800 Euro per customer account cost.