Average Customer Acquisition Cost (CAC) By Industry: B2B Edition
When people ask me how to evaluate the ROI of their marketing campaigns, I tell them to start with their customer acquisition cost (CAC). That metric, along with Lifetime Value of a Customer (LTV) are your best friends in the world of B2B marketing. Once you understand your CAC within each marketing and advertising channel, you know two things: (1) Which channels to invest more and less in; and (2) your marketing department’s strengths and weaknesses. The latter can be ascertained by comparing your CACs against industry benchmarks.
The purpose of this article is to help you understand what a good CAC looks like within your industry. It may even be helpful to compare your CAC to adjacent industries to see if you’re within the broader range of other B2B Businesses.
Before we begin, let’s get definitions and clarifications out of the way.
- I define Customer Acquisition Cost as: Total marketing spend divided by total new customers. This calculation is made on a channel by channel basis. For example, if you spent $1,000 acquiring 5 customers through SEM, your CAC for SEM would be $200.
- The comparison chart below compares CACs in the 17 industries our firm has the most experience with. Within each industry, I share two types of CAC: Organic and Inorganic. (All lead generation strategies can be separated into one or the other.) By “Organic,” I mean SEO and Organic Social. By “Inorganic,” I mean PPC / SEM and Paid Social.
- This analysis does not include CACs for email marketing, in-person events, direct mail, outdoor advertising or other forms of lead generation about which my firm does not have data.
- All data comes from client analytics accounts, sourced anonymously. Note that our data on Organic CAC is weighted more heavily towards SEO because we are an SEO company; and our data on Inorganic CAC is weighted more heavily towards PPC / SEM than Paid Social, as our clients are primarily B2B.
I hope you find this information useful in evaluating the effectiveness of your various marketing programs.
Average Customer Acquisition Cost (CAC) By Industry
Below are the average CACs in 17 industries, broken down into Organic and Inorganic for each industry. You’ll notice that most of these industries are B2B, though some are high-ticket B2C.
|Industry||Average Organic CAC||Average Inorganic CAC|
|Consumer E-commerce / Retail||$87||$81|
|Higher Education & College||$862||$1,985|
|Law (Business / Commercial)||$584||$1,245|
|Luxury Real Estate||$660||$1,185|
|Manufacturing & Distribution||$662||$905|
|Oil & Gas||$710||$1,003|
|PCB Design & Manufacturing||$330||$658|
|Point of Sale||$680||$841|
The Most Effective B2B Lead Generation Strategies For A Low CAC
Since this article only concerns online forms of B2B lead generation, keep in mind that some offline lead gen strategies, such as attending trade shows or executive events, can be extremely effective, particularly if your business revolves around old-fashioned networking. Within online lead generation, however, we are clear about which strategies tend to have the lowest CAC, making them the most efficient use of your marketing dollars.
Overall, Thought Leadership-based SEO, sometimes referred to as content marketing, has the lowest CAC of any lead generation strategy. This fact, of course, varies by industry, where B2B SaaS, Financial Services, Real Estate, and Tech businesses tend to benefit the most from SEO, whereas Commercial Insurance, Construction, and Aviation tend to benefit the least.
In a similar, low-CAC bracket is:
- LinkedIn advertising, which, from our studies, has emerged as more valuable than Google Adwords / SEM
- Webinars, when produced regularly and professionally
- E-mail marketing (mostly because it is cheap to do en masse)
How Your CAC Relates to Customer Lifetime Value
Where your CAC tells you how much it costs to acquire a new customer, a customer’s lifetime value (LTV) does the opposite: it tells you how much profit, on average, each new customer provides. The simplest way to do so is to divide your monthly or annual profit by the number of unique customers you saw in that time period. You can then multiply that result by the number of years the average customer continues to buy from you to find your average customer LTV.
You should aim for an LTV of at least 3 times your CAC. This provides a comfortable buffer on each side, ensuring that you aren’t overspending on marketing. You should also weigh this ratio against historical trends, and when possible, direct competitor data to provide context. If, for instance, your LTV to CAC ratio is only 2:1 but there’s strong growth compared to historic trends, that doesn’t mean you should cut your marketing spend to try to reduce your CAC. In that case, your LTV will continue to rise as newer customers return and keep making purchases.
This is especially useful to keep in mind if you’ve just launched a new marketing campaign or committed to a longer term strategy. Let’s say you’ve just started an SEO campaign. It will take about 4–6 months before you begin seeing results, meaning that your LTV to CAC ratio will take a hit for those first few months. Once the campaign is well underway, however, your ratio will begin to increase and should continue to do so for the length of your campaign.
Next Steps To Achieve a Low CAC Through Organic Marketing
You may have noticed that organic CAC beats out inorganic CAC in almost every case. This is for two reasons. The first is that an investment in organic channels will take longer to pay off, but results in sustainable lead generation that doesn’t require a constant influx of cash to maintain. The second reason is that your organic CAC relies more on skill and creativity. You need to find a good firm to work with, but if you do, your CAC will be much lower than your competitors who rely on inorganic channels.
If you’d like to know more about using organic marketing channels to lower your CAC, feel free to get in touch. We have presences in Sacramento, Los Angeles, and all around the US, and have helped businesses in many B2B industries achieve higher ROI via SEO than any other lead generation strategy.