How WhatsApp Business Can Help Reduce CAC For Your Business

Your next customer could be just a chat away!

Yes, that’s how easy it is to find a new customer with WhatsApp Business. You can find customers from any corner of the world and engage with them in live chat with WhatsApp Business. 

WhatsApp Business has changed the definition of e-commerce. What started as an instant messaging tool has created a revolution in the world of digital e-commerce and has opened up a whole new dimension of social marketing. Especially in difficult times such as the pandemic, WhatsApp Business has been nothing less than a boon for businesses all over the world.

Now businesses can acquire new customers and expand their market range to international borders with WhatsApp Business and avoid pumping a lot of dollars into physically building the market.  

Let’s move ahead into understanding the basics of CAC and how it can be reduced with the help of WhatsApp Business.

What is CAC?

Customer acquisition cost or the CAC is the cost involved in sales and marketing to identify potential leads, nurture them and finally have them converted into customers. In simple words, CAC is the amount of revenue that a business invests in getting a new customer. 

Client acquisition cost involves the following major components: 

  1. Marketing and advertisement costs
  2. Salary of marketers
  3. Costs of salespeople
  4. Cost of tools involved
  5. Discounts, coupons, offers, and gifts

A business aims to get an ROI against the CAC in the form of customer’s purchases throughout its lifetime or its Customer lifetime value

How is CAC calculated?

CAC is calculated as the total cost involved in acquiring new customers divided by the number of customers acquired over a certain period of time. 

CAC= Total cost in acquiring new customers/
          No. of customers acquired during a certain period. 

To make it more simple, consider this example:

If you invest $2000 to acquire 20 customers in a month, the CAC per customer would be $100.  

How does CAC affect CLV and ROI?

Customer acquisition cost (CAC) is directly related to Return on Investment (ROI) in the following manner:

ROI=CLV- CAC

ROI: Return on Investment
CLV: Customer Lifetime Value
CAC: Customer Acquisition Cost

For any business, the ideal case is to have a positive ROI which reflects that the business is making profits for every customer that it acquired. The worst case is to have a negative ROI, which indicates that the cost of acquiring a customer is much higher than the returns that the business earns throughout its lifetime. 

The ideal ratio between CLV and CAC is 3:1.

In order to have a positive ROI, businesses need to focus on long-term customer retention. And to achieve that, businesses need to offer frequent customer engagements, excellent customer care services, occasional rewards, discounts, and loyalty offers.  

Advantages of Low CAC

Every business wants to grow.  But having a very high CAC  can limit the growth and scalability of a business. If the CAC  of a business is very high as compared to the ROI, growth won’t be sustainable because acquiring customers will cost more than the profit generated from each customer. 

A low CAC can add more scope for business growth and result in faster ROI cycles. However, deliberately keeping the CAC numbers very low by cutting down on marketers, salesperson or marketing budget can negatively impact the business and make it more difficult to acquire and sustain customers in the long run.

How WhatsApp Business Reduces CAC For Your Business

Here is how WhatsApp Business affects each component of CAC and  help reduce CAC for your business:

1. Marketing and advertisement costs

One of the biggest advantages of marketing through WhatsApp Business and WhatsApp Business API is that it doesn’t cost you anything! 

Yes, it’s true. WhatsApp and WhatsApp Business is a free messaging platform that can be used to personally connect with your customers, highlight your products and services, and answer their questions throughout their shopping experience.

WhatsApp has more than 2 billion active users worldwide. By using WhatsApp Business to connect with them, not only do you get instant access to a large target audience, but it also makes it easier to identify potential leads and convert them into customers easily.

A lot of businesses also use referral programs to easily acquire new customers using your customers’ personal networks. 

2. Salary of marketers

Unlike traditional businesses, you do not need a large team or even an office to run a business or build a customer base.  Using WhatsApp Business, you can automate a lot of processes. This will reduce the dependency of marketers and helps you save a lot of money on their salaries. 

With WhatsApp Business and WhatsApp Business API tools Like SocialEpoch SCRM, you can generate links for your customers to connect with you, reply to thousands of customers with just a click, and easily manage large customer bases while providing excellent in-tile customer care services. 

3. Costs of salespeople

CAC as cost of sales people

Just like marketers, the role of salespeople can also be reduced. Not only WhatsApp Business allows you to reach a much wider audience base, proves to be a more effective mode of marketing. WhatsApp users have the highest messages open rate which is around 98%. This indicates that businesses marketing through WhatsApp Business and its API will have a much higher chance of acquiring new customers.

With a reduced number of salespeople, WhatsApp Business can help you save a lot of money in your CAC process. 

4. Cost of tools involved

CAC as cost of tools involved

As mentioned earlier, WhatsApp Business is a free tool. Using it in acquiring new customers can instantly bring your CAC to a bare minimum. However, you can subscribe to certain paid services of WhatsApp Business API tool SocialEpoch. The subscription will allow you to add certain features to your WhatsApp Business API such as multiple agent accounts and 10 user accounts, detailed data analytics, chatbot support, and more.

5. Discounts, coupons, offers, and gifts

Gifts and vouchers for CAC

Since WhatsApp Business helps you save a lot of cost on all components of CAC, this gives your business higher returns. You can use the returns to offer discounts, coupons, offers, and loyalty rewards. By doing so, you can earn loyalty from your customers and still earn a good profit from your sales.

Conclusion

WhatsApp business is the synonym of modern-day marketing and has unmatched advantages as compared to traditional marketing. WhatsApp Business not only makes it easy for businesses to find new customers, increase engagement with existing customers and extend superior customer support, but it also makes the entire sales funnel more efficient. WhatsApp Business positively impacts the operations and marketing costs and helps reduce CAC to a great extent. 

To learn more about SocialEpoch SCRM, click here or drop a mail at salessupport@socialepoch.com