In my first web venture, initial visitors came from paid clicks. We paid only 30 cents per click to Google. So, cost to get a visitor was $0.30
Visitors landed on a page that explained our service in brief text and brilliant images. We also said it was free and easy. We had a clear call for action to ‘check out’ our service. 1 of 4 visitors clicked to check us out. So, cost of a visitor willing to check us out was $1.20 (4 times previous line)
Checking out our service took only a few steps and a few minutes. But at each step we lost half the visitors. There were 5 steps to checking us out, so only 1 of 32 who started checking us out finished it. So, cost to get checked out by a visitor was $38.4 (32 times previous line)
Among the visitors who checked us out, 1 of 2 liked us and created a user account. So, cost of a registered user was $76.8 (twice previous line)
Since our service was free, users became customers only when they came back and consumed our ads or if we sold them something else. Only 1 of 4 registered users came back. So, cost of customer acquisition was $307.2 (4 times previous line)
Our customers posted something in facebook that showed our name. We got a few customers that way, but just enough to replace customers who forgot us over time. So, cost of customer acquisition remained at $307.2 even after factoring drop offs and referrals.
When I hear an entrepreneur equating ‘cost per click’ and ‘cost of customer acquisition’, I remember this story. I repeat this story often. Next time, I am just going to send this link