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Karunakar
1% Better • 5m
Customer Acquisition Cost (CAC) The Fitness Brand's First Customer Riya had a dream to launch her own fitness brand, "FitFlex," offering premium gym wear for fitness enthusiasts. She invested months into designing her products and building a sleek website. When everything was ready, she faced her next big challenge: getting people to buy her gym wear. She decided to run social media ads to promote her brand. Her first campaign was simple — an Instagram ad showcasing her best-selling leggings. She set a budget of $5,000 for the month. With excitement, she launched the campaign, eager to see the results. After 30 days, Riya sat down to analyze the outcome. The campaign had reached 100,000 people, and 2,000 of them clicked on her website. Of those, 500 people purchased her gym wear. She was thrilled to make her first sales but wondered how much it actually cost her to acquire each customer. To figure this out, Riya calculated her Customer Acquisition Cost (CAC): CAC= TotalMarketingSpend / NumberofNewCustomers This meant Riya spent $10 to acquire each new customer. She compared this to the average order value (AOV) of her customers, which was $50. Since her products had a 50% profit margin, Riya made $25 in profit per order after deducting costs. Subtracting her CAC of $10, she realized she earned $15 in profit per customer. Riya was happy but knew she could optimize her CAC to make even more profit. She experimented with strategies like creating engaging content, collaborating with fitness influencers, and offering discounts to her email subscribers. Over time, her CAC dropped to $7, increasing her profit per customer to $18. This story shows how understanding and optimizing CAC helped Riya scale her business while staying profitable. Follow Our Medium blog for Finance and Business insights like this: https://medium.com/@FoundrBite https://www.linkedin.com/in/foundrbite/
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