When running a business that relies on a subscription model, understanding your costs is necessary. One of the most important metrics you need to track is how much you spend to bring in new subscribers, also known as your subscriber acquisition cost (SAC).
Your subscriber acquisition cost is your business's cost for gaining each new subscriber. Just like you'd want to know how much you're spending on inventory or staff, knowing your SAC helps you make smarter decisions about where to invest your marketing budget.
Unfortunately, acquiring new business or email subscribers isn't free. Whether you're running paid ads, creating content, or offering special promotions, each marketing activity has a cost. Understanding these costs helps you determine whether you're spending your money wisely or need to adjust your strategy.
So, what is subscriber acquisition cost, and how do you calculate it? Keep reading to find out.
What is subscriber acquisition cost?
Subscriber acquisition cost is similar to your customer acquisition cost. It tells you how much you spend to acquire a new subscriber rather than one-time customers. This distinction between customer and subscriber acquisition costs is important because subscribers represent ongoing revenue potential rather than a single purchase.
SAC includes all the money you spend on marketing and sales efforts to convert someone into a subscriber. This could mean sales and marketing costs like paid advertising, content creation, email marketing campaigns, social media promotion, or any other tactics you use to attract new subscribers.
Understanding your SAC is especially important for subscription-based businesses because it impacts your bottom line. A high SAC might mean you're spending too much to acquire subscribers, while a low SAC could indicate efficient marketing strategies or potentially underinvestment in growth.
Your SAC isn't just another number to track; it is a way of measuring the effectiveness of your sales and marketing efforts.
It's a metric that helps you make better decisions about your marketing budget. Knowing exactly how much you spend to acquire each subscriber allows you to allocate your resources more effectively and set more realistic growth targets.
Subscriber acquisition cost also helps you measure the effectiveness of your marketing campaigns. If one campaign has a lower SAC than another, you might want to invest more in the successful approach.
Key components of subscriber acquisition cost
To accurately calculate SAC, you must consider all costs of acquiring subscribers. This includes obvious expenses like ad spend but also less apparent costs such as:
- Marketing team salaries and benefits
- Content creation costs (writers, designers, video producers, etc.)
- Software and tools used for marketing
- Promotional materials and campaigns
- Marketing agency fees
- Event marketing expeRememberabout the indirect costs that contribute to your ability to acquire customers. These might include website hosting, email marketing platforms for subscriber data management, and customer service resources dedicated to new subscriber support.
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Calculating subscriber acquisition cost is easier than you might think. Follow these simple steps to see how much it costs you to acquire a new subscriber:
Step 1: Identify all the costs involved in acquiring subscribers
List every expense related to acquiring subscribers. If you're a business with a subscriber model, you'll want to include every cost you incur to attract and convert paying customers. Meanwhile, if you're measuring your cost per email subscriber, you'll consider all costs for promoting signing up for your email list.
These costs include direct and indirect marketing costs that support your acquisition efforts. Be as thorough as possible, as missing costs can lead to an artificially low SAC and poor decision-making.
Step 2: Track and sum up your marketing expenses
Add up all your marketing expenses over a specific period. Depending on your business needs, this could be monthly, quarterly, or annually. Make sure to include both one-time costs and ongoing expenses. Keep detailed records of all spending related to subscriber acquisition.
Step 3: Calculate the number of new subscribers acquired during the same period
Determine the number of new subscribers you acquired during the same period you're analyzing costs. A good subscription management system should provide accurate tracking. Do not include existing customers in the calculation, as this can skew the results.
Step 4: Apply the formula for SAC
The formula for calculating subscriber acquisition cost is:
SAC = Total marketing costs / Number of new subscribers.
For example, if you spent $20,000 on marketing in a month and gained 1,000 new subscribers, your SAC would be:
$20,000 / 1,000 = $20 per subscriber
Step 5: Interpret and analyze the results to evaluate the effectiveness of your acquisition strategies
Look at your SAC in context. Compare it to industry benchmarks, your historical costs for customers acquired, and customer lifetime value. This analysis will help you understand if your acquisition rate is sustainable and which strategies are most effective.
Tips for lowering your subscriber acquisition cost
Every business should aim to reduce its subscriber acquisition cost. A lower cost means reducing your marketing spend while increasing its effectiveness. Here are some approaches you can use:
Improve targeting and segmentation in marketing campaigns
Divide your target market or audience into groups based on their behaviors, demographics, and interests. Use the data from existing customers to create detailed profiles of potential customers.
Then, customize your marketing messages and channels to each customer category. A more targeted approach like this will lead to higher conversion rates because you're reaching the right people with the right message.
Use content marketing and organic strategies to attract subscribers
Create content that addresses your audience's needs to help attract new customers. Content can include blog posts, images, videos, and social media content that naturally draws people to your brand. When you consistently deliver helpful content, you build trust.
Optimize your sales funnel to increase conversion rates
Look at every step in your subscription process and identify where potential subscribers drop off. Remove unnecessary form fields, simplify the signup process, and test different landing page layouts. Make sure your value proposition is clear and compelling at each stage. Small improvements in conversion rates can significantly lower your overall acquisition costs.
When tracking your subscriber acquisition cost, it's easy to make mistakes that can give you an inaccurate picture of your marketing effectiveness. Knowing these common pitfalls can help you maintain more accurate calculations and make better decisions. Here are the key mistakes to watch out for:
Not including all relevant costs in the calculation
Many businesses only count their direct advertising spend when calculating SAC. But you need to include everything, from the salary of your marketing team to the cost of your marketing software and tools.
Even small overhead costs, like the portion of your office space used by the marketing team, should be factored in. Missing these costs can give you an artificially low SAC and lead to poor budget decisions.
Focusing only on paid campaigns and ignoring organic efforts
While paid advertising costs are easy to track, don't forget about your organic marketing investments.
Content creation, social media management, SEO efforts, and time spent on community engagement all contribute to subscriber acquisition. These activities have real costs in terms of time and resources, and leaving them out of your calculations can skew your understanding of true acquisition costs.
Why tracking subscriber acquisition cost matters for your business
Understanding and tracking your SAC is essential for building a sustainable subscription-based business. When you know exactly how much you're spending to acquire each new subscriber, you can make better decisions about your marketing investments and spot opportunities for growth.
This knowledge helps you allocate your budget more effectively, identify which marketing channels are performing best, and determine whether your current acquisition strategies are profitable. Having a clear picture of your SAC also helps you set realistic growth targets and make more accurate financial projections for your business.
Modern tools and platforms make tracking SAC easier than ever. Mailchimp offers automated features for monitoring marketing expenses and subscriber growth while providing essential marketing tools to help you attract more subscribers and retain customers.
Key Takeaways
- Your subscriber acquisition cost (SAC) shows exactly how much you spend to acquire each new subscriber, helping you make better decisions about your marketing budget.
- Calculating SAC requires tracking both direct costs, such as advertising, and indirect costs, such as staff salaries, marketing tools, and content creation expenses.
- A lower SAC doesn't always mean cutting costs; it often means spending more strategically through better targeting, content marketing, and funnel optimization.
- Regular SAC tracking through tools like Mailchimp helps you identify the most cost-effective marketing strategies for growing your subscriber base.