Growth
Most Gym Owners are aware of their profit, revenue, and churn, but what other metrics are important to know as a business owner? In this blog we’re breaking down Customer Acquisition Cost, or as we like to call it, C.A.C.
What is C.A.C? How do we calculate it? What does it mean for your gym? And how can you lower it? Read on to learn how to cut the cost of acquiring clients in your gym.
WHAT IS C.A.C?
Customer Acquisition Cost is the price you pay to acquire a new client. C.A.C takes into account marketing costs, and sales expenses you incur while bringing on a new member.
HOW TO CALCULATE C.A.C
The formula to find your Customer acquisition cost is simple:
(Total Marketing Spend + Total Sales Expenses)➗Number of Customers Acquired = CAC
WHY YOU SHOULD TRACK YOUR CUSTOMER ACQUISITION COST
It’s possible (and extremely frustrating) to be gaining members each month, but still have a stagnant bank account. Bodies inside the gym don't always equate to money in the bank. The reason for this is often that CAC is too high to turn a profit on acquiring the new member. When this occurs you will need to find a way to lower your marketing or sales costs so that you are profitably bringing on new members.
If over time you notice your CAC is rising, it’s a good idea to take a look at your advertising costs. Are there ads that used to perform well, that no longer do? It may be time to turn those off and test new creative in the marketplace.
Numbers take the emotion out of the business and allow you to make decisions that positively affect the greater good of the gym.
HOW CAN YOU BECOME MORE PROFITABLE?
When looking at the profitability of your gym, you have two options to increase it. You can either lower the cost to acquire a client, or you can increase the amount of money they give you.
To lower your acquisition cost there are a number of options depending on your situation. Number one would be to lower your ad spend. Take a look at your lowest performing ad(s) and crank the spend down or turn off the ones that aren't converting. Next would be to cut your sales costs. It may be worth looking into a VA for lead nurture as they cost much less than an inhouse lead nurturer. Maybe the structure of your sales commissions need to change or you may find you can't afford to hire someone for sales.
The other option for increasing your profit margin is increasing how much each client spends with you. For example, offering a high ticket program for those who are willing to pay more for add on services, can increase the lifetime value of your clients. Your overall pricing structure could be increased as well, or you could diversify the products and services you offer such as adding supplements, apparel, nutrition, accountability, etc.
BEFORE YOU GO…
If you found this helpful check out some of our other blogs for more tips for growing your gym. Want to stay up to date on all things Gym Owner? Join our weekly newsletter for fitness industry trends, giveaways, resources, and more!
